Enterprise Management Incentives (EMI) Share Options

Enterprise Management Incentives (EMI) schemes are tax-advantaged share option schemes that allow small and medium-sized companies to grant options to key employees. They offer significant tax benefits when set up and operated correctly, but you must follow strict rules and notification deadlines to maintain these advantages.

What is an EMI scheme?

An EMI scheme allows your company to grant share options to employees with favourable tax treatment. Share options give employees the right to buy shares in your company at a fixed price (the 'exercise price') at a future date. If the company grows in value, employees can buy shares at the lower fixed price and benefit from the increase.

The scheme is designed to help smaller trading companies attract and retain talented employees by giving them a stake in the business.

Company eligibility requirements

From 6 April 2026 onwards, your company can operate an EMI scheme if it has:

• Gross assets of £120 million or less
• Fewer than 500 full-time employees
• A total value of unexercised options granted under EMI not exceeding £6 million

Before 6 April 2026, the limits are lower:

• Gross assets of £30 million or less
• Fewer than 250 full-time employees
• A total value of unexercised options granted under EMI not exceeding £3 million

These increased limits will not apply if your company has its registered office in Northern Ireland and trades in goods or the provision of electricity.

Exercise period changes

For companies that qualify under the increased limits from 6 April 2026, the maximum exercise period has increased from 10 years to 15 years. This extended period applies to all options that have not already lapsed, expired or been exercised.

Your company retains the tax advantages if the option contracts are amended in line with the option agreement or legislation where required. However, the option must be exercised on or after 6 April 2026 to benefit from the increased holding period.

Setting up your EMI scheme

Before you grant any options, you must register your EMI scheme with HMRC through the employment related securities (ERS) online service. You'll receive a unique scheme reference number within 7 days of registering. You need this reference number before you can notify HMRC about any option grants.

Notification deadlines

The deadlines for notifying HMRC about option grants depend on when you granted the option:

For options granted before 6 April 2024: You must notify HMRC within 92 days of the date of grant.

For options granted on or after 6 April 2024: You must notify HMRC by 6 July following the end of the tax year in which the grant was made. For example, if you grant options in the 2025/26 tax year, you must notify HMRC by 6 July 2026.

If you fail to meet these deadlines, you risk losing the tax benefits for both your company and your employees.

How to notify HMRC

The method you use depends on how many employees you're providing details for:

For 30 employees or fewer: Use the online service directly through your Government Gateway account.

For more than 30 employees: Download the EMI notification template from HMRC, complete it following the guidance notes, then submit it through the online service.

The online service will not save the details once submitted, so take screenshots of each page or save a copy of your template file for your records. Always keep a copy of the confirmation that HMRC has received your notification.

If you miss the deadline

If you have a valid reason for missing the notification deadline, you can make a reasonable excuse claim. HMRC will take your reasons into account, and if they agree your excuse is reasonable, your employees will still qualify for the tax advantages.

To make a claim, you must first register your scheme if you haven't already done so. Then email shareschemes@hmrc.gov.uk with:

• Your unique scheme reference number
• The company name
• The scheme name
• The date options were granted
• Your agent's name (if you have one)
• The reason your notification is late

If your excuse relates to IT problems, provide as much information as possible, including any online helpdesk reference numbers from HMRC.

If HMRC accepts your reasonable excuse, you'll receive a reference number. You must then complete the notification as soon as possible using the ERS online service.

Annual reporting

You must submit an end of year return for your EMI scheme. You can either use HMRC's end of year return template or create your own using HMRC's technical note. HMRC provides guidance notes to help you complete specific sections.

Before submitting your return, check your files for formatting errors using HMRC's spreadsheet checking service to avoid delays. You then submit your return through the employment related securities files service.

Tax advantages

The main appeal of EMI schemes is the tax treatment. When operated correctly, employees can benefit from favourable Capital Gains Tax treatment when they eventually sell their shares, rather than paying Income Tax and National Insurance on the gain. Your company may also receive Corporation Tax relief on the difference between the exercise price and the market value when employees exercise their options.

However, these benefits only apply if you follow all the rules and meet the notification deadlines.

Sources

• Enterprise Management Incentives (EMI): end of year return template and guidance notes
• How to make a reasonable excuse claim for a late Enterprise Management Incentives notification
• Submit an Enterprise Management Incentives (EMI) notification

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.