The Chancellor's 2025 Budget significantly expands the Enterprise Management Incentive (EMI) scheme so that scale‑ups, not just start‑ups, will be able to offer EMI options to employees – and on an extended and simplified basis.

EMI is the UK's most favourable tax-advantaged share scheme, and so if you parked EMI because you were over the thresholds – or you have been constrained by the current granting limits – it's worth a fresh look. 

What's changing and when?

From 6 April 2026:

  • the group employee headcount cap will rise from 250 to 500;
  • the group gross assets limit will jump from £30 million to £120 million; and
  • the aggregate unexercised EMI options cap will double from £3 million to £6 million. 

The maximum lifespan for EMI options will also be extended from 10 to 15 years, and even existing EMI options may be extended to 15 years without losing their tax advantaged status.

Additionally, from April 2027, EMI options will no longer need to be notified to HMRC to maintain their EMI status. The annual Employment Related Securities (ERS) return requirement remains. 

Who will benefit?

EMI is the UK's most tax-efficient and flexible discretionary option scheme, offering CGT treatment on gains arising between grant and exercise, and easier access to business asset disposal relief (BADR) on those gains.  This has long made EMI the most attractive UK employee share incentive to both employees and employers – but to date it's only been available to small qualifying companies.

The proposed reforms will open EMI to later‑stage growth businesses that previously failed the assets or headcount tests. It will allow  a large number of scale-ups, later-stage venture-backed businesses and more capital-intensive companies to become eligible for EMI for the first time, enabling them to replace more complex and/or less tax favourable incentive arrangements with an EMI scheme.

Companies will also have more headroom to provide additional EMI grants to existing option holders, make broad‑based grants or reserve capacity for future hires, together with more time to achieve exercise milestones before the expiry of the options. 

The relaxation of the notification requirement also presents a major benefit to both companies and participants and shouldn't be overlooked.  It will not only simplify the grant process, but will also reduce the risk of EMI options failing to qualify through simple admin error – currently one of the most common reasons why EMI option grants fail.

What's changed regarding PISCES? 

The Budget also gave a further update on the interaction between EMI options and the recently introduced Private Intermittent Securities and Capital Exchange System (PISCES). 

HMRC had already confirmed that companies may amend existing EMI (and CSOP) options to add a PISCES trading event as an exercise trigger without losing their tax benefits. The Budget confirmed that this flexibility will be extended to all options granted before 6 April 2028 – rather than only those granted before the Finance Bill 2025-26 receives Royal Assent.

Why is this relevant? PISCES aims to enable private companies to operate periodic, regulated trading windows for their shares. Being able to exercise EMI options at a PISCES event lets employees turn options into cash without waiting for a traditional share sale, IPO or business and asset sale, while preserving EMI tax treatment. 

However, PISCES is still young. With this extended deadline, we expect many companies to resist the urge to immediately update their EMI option schemes to include a PISCES sale as an additional exercise event. If you do choose to update your EMI options, specific drafting will be required to avoid removing EMI status. 

What should you do now?

If you're considering EMI options in light of the proposed changes:

  • Check that you meet all EMI qualifying conditions, including requirements relating to your ownership, group and trading structure. Employees receiving an EMI option must also meet certain conditions. The £250,000 limit per employee and working time requirement remains unchanged.
  • If you currently run another share (or phantom) incentive scheme, consider whether to migrate existing, as well as future, awards to EMI, and seek specialist advice on how to structure your new scheme and manage the changes.
  • Review the additional headroom in your 'option pools' under the increased £6 million company‑wide cap and consider additional grants.
  • Review existing options approaching their expiry date and, where helpful, consider extending their term.
  • Continue to notify grants to HMRC (by 6 July following the tax year of grant) under the existing notification regime.
  • If you expect to use PISCES, consider inserting a specific PISCES exercise trigger for existing and future grants and seek specialist advice.

This note is based on Budget 2025 announcements and may change when the relevant Finance Bills and HMRC guidance are published.

Budget 2025 reveals significant expansions to EMI – can you now qualify?

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