The Enterprise Management Incentive (EMI) scheme has just undergone its most significant expansion since it was introduced in 2000. From 6 April 2026, the Finance Act 2026 quadruples the gross assets threshold, doubles the employee ceiling, doubles the option pool limit, and extends the exercise window by five years. If your company previously outgrew EMI — or if you have never qualified — the rules have almost certainly changed in your favour. And with the notification deadline for this tax year falling on 6 July 2026, you have three weeks to act.
What Changed on 6 April 2026
The EMI scheme allows qualifying companies to grant share options to employees with substantial tax advantages: no income tax or National Insurance on grant or exercise of market value options, and Capital Gains Tax at 18% under Business Asset Disposal Relief (BADR) on the first £1m of gains — a 29% saving against non-EMI options, even after BADR rose to 18% in April 2026.
The Finance Act 2026 changes the qualifying thresholds as follows:
- Gross assets limit: £30 million → £120 million (quadrupled)
- Employee limit: 250 FTE → 500 FTE (doubled)
- Company option pool: £3 million → £6 million (doubled)
- Exercise window: 10 years → 15 years from date of grant
- HMRC notification requirement: Removed from April 2027 (currently still required)
Grant Thornton notes that rapidly scaling organisations and high-growth SMEs stand to benefit most, particularly at the critical stage where retaining experienced teams and attracting specialist talent is vital for expansion. BDO confirms the scheme still offers a 29% tax saving compared with non-EMI options, even accounting for the BADR rate increase.
The 6 July 2026 Deadline — Three Weeks Away
This is the one that catches companies out. Under current rules (which apply until April 2027), any EMI options granted during the 2025/26 tax year must be notified to HMRC by 6 July 2026. This is a separate process from the annual Employment Related Securities (ERS) return. Failure to notify kills the EMI status of the option entirely — the tax advantages are permanently lost, and the gain on exercise becomes subject to income tax and NICs at full rates.
If your company granted EMI options at any point between 6 April 2025 and 5 April 2026, check your compliance position now. The notification removal promised from April 2027 does not help you retroactively. HMRC’s published guidance on the expanded limits makes clear the notification obligation remains live for this cycle.
Companies That Previously Outgrew EMI: Reassess Now
The practical problem before April 2026 was that high-growth businesses would qualify for EMI early in their lifecycle, begin building incentive plans around it, and then breach the £30m gross assets or 250-employee threshold as they scaled. At that point, the company had to migrate to less flexible alternatives — Company Share Option Plans (CSOPs), non-tax-advantaged options, or growth shares — often at the worst possible time, when it most needed to retain senior hires ahead of a fundraise or exit.
The expansion to £120m gross assets changes the calculus entirely. According to Vestd, the majority of UK scale-ups and growth-stage companies will now qualify that previously did not. Stevens Bolton specifically flags this as the key question for CFOs: if your company outgrew EMI in the last three to five years, does it now re-qualify? The answer is frequently yes.
Reassessment requires more than a headline eligibility check. You need to confirm the company still carries on a qualifying trade (no leasing, farming, financial activities or property development), that it is not under the control of another company (see the PE caveat below), and that no disqualifying events have occurred in the interim.
The PE Caveat — A Hard Limit That Has Not Changed
One point that the headlines tend to gloss over: PE-controlled companies typically cannot operate EMI schemes. The scheme requires that the granting company is not under the control of another company. Where a private equity house controls a portfolio company through its fund vehicle, the portfolio company fails this test. This is a fundamental structural point, not a technicality.
However, there are two important carve-outs. First, where the PE fund does not technically control the company — for example, a minority PE stake alongside strong founder/management ownership — EMI may still be available. Second, foreign-headquartered companies can grant EMI options over their stock to UK employees, provided other conditions are met. A US holding company with a UK subsidiary, for instance, can operate an EMI plan for its UK staff. Both scenarios require careful legal and tax analysis before proceeding.
For PE-backed businesses that do not qualify for EMI, management incentive plans (MIPs) using growth shares, sweet equity, or CSOPs remain the primary tool. The EMI expansion does not directly affect the MIP toolkit for most PE portfolios, but it raises the bar for what management can achieve elsewhere — which matters in competitive hiring situations.
Extending Existing Options From 10 to 15 Years
Here is a specific action point for any company that has EMI options granted seven or eight years ago with no clear exit horizon. From 6 April 2026, those options can be amended to extend their exercise window from 10 years to 15 years — without this being treated as a surrender and regrant for tax purposes. This is significant because a regrant would require setting a new exercise price at current market value, losing the advantage of the original (and typically much lower) exercise price set at grant.
BDO’s analysis confirms that simply extending the time limit, without making other changes, allows the option holder to retain the original lower exercise price while giving the company five additional years to reach an exit or liquidity event. The 15-year window does not apply automatically to pre-April 2026 options — the terms must be formally amended. Get this documented and in place before options expire unnecessarily.
PISCES: A New Liquidity Route for EMI Options
One of the less publicised changes is the intersection of EMI with the new Private Intermittent Securities and Capital Exchange System (PISCES), the FCA’s new private market trading platform. HMRC has confirmed that EMI option agreements can be amended to include a PISCES-linked exercise event — that is, employees can exercise their options and sell immediately through a PISCES trading window — without this triggering a disqualification of the option’s EMI status.
This is meaningful because it addresses one of EMI’s structural weaknesses: the absence of a liquidity mechanism before a full exit. For growing companies that expect to be PISCES-eligible — available to private companies from mid-2026 onwards — amending EMI option agreements now to include PISCES exercise rights gives employees a credible route to realise value without waiting for a trade sale or IPO. The drafting must be precise: a general discretionary exercise provision is not sufficient; the PISCES event must be a specifically named exercise trigger in the option agreement.
Tax Mechanics: What the Numbers Look Like in 2026
For context on why EMI remains a compelling tool despite BADR rising to 18%:
- On exercise of a market value EMI option: no income tax, no NICs
- On sale of shares held at least 24 months: CGT at 18% BADR rate on the first £1m of gains
- Above £1m gains: standard CGT at 24%
- Employer corporation tax deduction available on the employee’s gain (provided conditions met)
- Employer NIC saving on option gains
- Versus non-EMI: income tax at 40–45% plus employee NICs at 2% and employer NICs at 15% — a combined marginal rate that dwarfs the EMI outcome
The Saffery guide to EMI in 2026 and Clarke Willmott’s scheme update both confirm that even at 18% BADR, EMI remains the most tax-efficient equity incentive arrangement available to qualifying UK companies.
Six CFO Actions Before 6 July 2026
- Notify HMRC of all EMI options granted in 2025/26 by 6 July 2026. This is your most urgent task. Check the ERS return submissions but also confirm that individual option notifications have been filed — they are a separate obligation.
- Reassess eligibility if you previously outgrew EMI. Run the gross assets, employee count, and qualifying trade tests against current figures. If you re-qualify, you can begin granting new options immediately.
- Review existing 10-year options for extension. Identify any options granted before April 2016 that are approaching their 10-year expiry. Amend option agreements to extend the exercise window to 15 years before they lapse unnecessarily.
- Review your option pool. With the company-wide limit doubling to £6 million, you may have headroom to bring more employees into the scheme or increase individual awards. Revisit your incentive strategy in light of the new ceiling.
- Consider PISCES amendment if applicable. If your company is considering PISCES participation, work with legal counsel now to amend EMI option agreements to include a properly drafted PISCES exercise event.
- Get advance assurance if qualification is in doubt. HMRC’s EMI advance assurance process gives a written confirmation that the company qualifies. It is free, relatively quick, and removes uncertainty before options are granted.
The Bottom Line
The EMI expansion is the most consequential change to UK management incentive planning in a generation. The headline numbers — four times the asset threshold, double the employees, double the option pool — are striking enough. But the real story is the number of high-growth businesses that previously hit the ceiling too soon and were forced into less efficient structures at exactly the wrong moment. That problem has been largely solved. The question now is whether your company takes advantage of it, or waits until the opportunity has passed.
If your business is approaching a funding round, a secondary transaction, or a potential exit in the next three to five years, EMI should be on your incentive planning agenda now. The 6 July notification deadline is three weeks away. The window to extend existing 10-year options is open. The new £6 million pool gives you genuine room to move.
Tanous works with CFOs and finance directors on equity incentive planning, management incentive structures, and the tax mechanics of PE-backed and owner-managed businesses. If you want to understand whether the expanded EMI regime applies to your company, or if you need to review an existing scheme before the July deadline, contact Mark Hendy at Tanous.