EMI share options for UK startups: rules and limits (2026/27)

Why startups use EMI

Enterprise Management Incentives let a company grant employees options over shares with tax advantages. Early hires often take a lower salary in exchange for equity, and EMI is the usual way to do that in the UK.

Investors expect to see an option pool in a seed round. A company that has already set up EMI has one less thing to organise when the term sheet arrives.

This is general information, not tax or legal advice. Check HMRC guidance or speak to a qualified adviser before granting options.

The company limits from 6 April 2026

HMRC's guidance says a company can offer EMI if it has assets of £120 million or less and fewer than 500 full-time employees. Before 6 April 2026 the limits were £30 million and 250 employees.

The limit on total unexercised EMI options, the company limit, rose from £3 million to £6 million. These changes took effect on 6 April 2026. The enhanced limits do not apply to specified Northern Ireland companies, which HMRC defines by registered office and goods or electricity activities.

Limits per employee

The individual limit is £250,000. HMRC's manual says it covers all EMI options granted by the employing company and group companies, valued at the time of each grant. Any excess does not qualify and gets no tax advantages.

Participants must work at least 25 hours a week for the company, or 75% of their total working time. A part-time adviser or contractor may fall short, so check who you plan to include.

The exercise period

From 6 April 2026 the qualifying exercise period for new options is 15 years, up from 10. HMRC's manual also lets existing options be extended to use the 15-year period, provided the option has not lapsed, expired or been exercised and is exercised on or after 6 April 2026.

Fixed-date options need specific procedures to be amended. Take advice before you change an agreement. A wrong amendment can cost an employee the tax advantage.

Tax treatment for your team

GOV.UK says an employee does not pay Income Tax or National Insurance if they buy the shares for at least the market value they had when the option was granted. Capital gains tax may apply when the employee later sells the shares.

A discount to market value at grant triggers Income Tax or National Insurance on the difference. For a startup, agreeing the market value with HMRC before you grant is the step I would put first.

Which companies cannot use EMI

Some activities are excluded, including banking, farming, property development, provision of legal services and ship building. HMRC lists these on its EMI guidance page.

If your product sits near one of these, read the rules closely with your adviser. Where the company does its work matters, and so does what it does.

Notify HMRC on time

For options granted on or after 6 April 2024, you notify HMRC by 6 July following the end of the tax year in which you made the grant. For grants before that date the deadline was 92 days. Missing it puts the tax benefits at risk for the company and employees.

You need your company details, the EMI scheme reference number from registering the scheme, employee and grant details, and Government Gateway credentials. If you are giving details for more than 30 employees you download a template, and for 30 or fewer you go straight to the online service.

EMI and your fundraising

Investors look at the pool size and who holds options. Keep your cap table tidy, and make sure each grant is documented and notified.

When you start talking to funds and angels, InvestorUniverse can shortlist UK investors by stage, sector and cheque size, so you spend your meetings on people likely to say yes.