EMI Share Options 2026/27: New Limits & Rules Explained

A founder we spoke to recently had written off EMI options as something for companies further along than theirs. Too much paperwork, too many restrictions, not worth it for a five-person team. That was a reasonable read of the rules eighteen months ago. It isn't anymore.

The Enterprise Management Incentive scheme, EMI for short, is the main way UK companies grant tax-advantaged share options to employees. From 6 April 2026, the eligibility limits got significantly more generous, and one of the more annoying compliance deadlines effectively disappeared. If you looked at EMI a year or two ago and decided it wasn't worth the hassle, it's worth another look.

What EMI actually gives you

An EMI option is a right to buy shares in your company at a fixed price (the exercise price) at some point in the future, usually when a specific event happens: an exit, a funding round, or after a set vesting period. The tax advantage is the whole point of the scheme. If the option is granted at market value, there's no Income Tax or National Insurance due on grant or on exercise. The employee only pays Capital Gains Tax when they eventually sell the shares, on the growth in value between the price they paid and what they sold for.

Compare that to simply giving someone shares, or granting an unapproved option, where the gain on exercise is typically taxed as income, through payroll, at rates up to 45% plus employee and employer National Insurance. EMI is the reason a £10,000 slice of equity in a growing company can actually feel like £10,000 to the person receiving it, rather than something closer to £5,500 after tax.

The limits just got a lot less restrictive

Before 6 April 2026, EMI was genuinely out of reach for some fast-growing companies, because the eligibility test was based on the company as a whole, not just the individual option.

Here's what changed, and what's still in place:

Gross assets. The company's gross assets couldn't exceed £30 million. From 6 April 2026, that's risen to £120 million, a change that moves EMI from "pre-seed startup only" to genuinely available for companies with real balance sheets.

Employee numbers. The limit was 250 full-time equivalent employees. It's now 500.

Company-wide option pool. The total unexercised EMI options a company can have outstanding at any time doubled, from £3 million to £6 million.

Exercise window. Options used to have to be exercised within 10 years of grant or they'd lose their tax-advantaged status. That's now 15 years, and HMRC has confirmed this extension applies retrospectively to options already granted, not just new ones.

What didn't change. The individual limit stays at £250,000 of unexercised options per employee, and the employee eligibility rules are the same: they need to work at least 25 hours a week for the company (or, if less, at least 75% of their total working time), and they can't already own more than 30% of the company.

If your company previously ruled itself out on the gross assets or headcount test, it's worth re-running the numbers. A lot of companies that didn't qualify in 2024 will qualify now.

You no longer have 92 days to notify HMRC

This is the change that trips people up, because so much advice written before 2024 is still floating around describing a rule that no longer applies to current grants.

For EMI options granted before 6 April 2024, you had to notify HMRC within 92 days of the grant date or the option lost its tax-advantaged status entirely, no exceptions. For options granted on or after that date, the notification deadline moved to 6 July following the end of the tax year in which the option was granted. Grant an option in August 2026, and your notification deadline is 6 July 2027, not some date in November 2026.

That's a genuinely useful simplification if you're granting options to a few people over the course of a year rather than all at once. You're no longer tracking a separate 92-day countdown for every individual grant.

It's going further still. From 6 April 2027, the standalone EMI notification requirement is being removed altogether. You'll still need to report everything through the annual return, but there won't be a separate notification step at all. Until that date arrives, though, treat the 6 July deadline as a real one. Missing it doesn't just risk a penalty, it can put the option's entire tax-advantaged status in doubt.

The annual return is where most of the real risk sits

Alongside the notification point, every company operating an EMI scheme has to file an annual Employment Related Securities return by 6 July following the end of each tax year in which anything happened on the scheme: a grant, an exercise, a lapse, or a release. This applies even if nothing happened at all in a particular year but the scheme is still registered; you still need to submit a nil return.

The penalties for missing the 6 July deadline are set out directly in HMRC's guidance and they escalate quickly:

£100, automatically, if the return isn't in by 6 July
A further £300 if it's still outstanding three months after the deadline
Another £300 at six months
£10 a day from nine months after the deadline, at HMRC's discretion

None of those figures are large enough to sink a company on their own. The real cost is what late or incorrect filing does to the underlying tax treatment. If HMRC later finds the scheme wasn't properly registered or reported, the options can lose EMI status retrospectively, which means the employee who thought they had a capital gains tax bill on exit discovers they actually have an income tax and National Insurance bill instead, often at the worst possible moment: during due diligence on a sale, when a buyer's lawyers go through exactly this kind of paperwork line by line.

EMI and selling the company later

If you've read our piece on Business Asset Disposal Relief, there's a detail specific to EMI shares worth knowing, because it's more favourable than the general BADR rules.

For ordinary shares, BADR requires you to hold at least 5% of the company's shares and voting rights for two years before a disposal. EMI shares are specifically exempted from that 5% test. Instead, the two-year qualifying period for BADR purposes runs from the date the option was granted, not the date it was exercised into shares, provided the shares were acquired after 5 April 2013 and you're still employed by the company (or a group company) when you eventually sell.

In practice, that means someone granted EMI options in year one, who exercises them just before a sale in year three, can still potentially qualify for BADR on the resulting gain, something that would almost certainly fail the ordinary 5%-plus-two-year test if they'd only held actual shares from the point of exercise. It's a meaningful reason EMI is worth using even for a relatively small number of options, rather than just issuing shares directly to an early employee.

What this means if you're thinking about granting options now

The eligibility changes make EMI worth a second look for companies that previously assumed they'd outgrown it or hadn't yet grown into it. But the scheme still has real conditions attached, around the kind of trade your company carries on, how the shares are structured, and whether your valuation for the exercise price will survive scrutiny if HMRC ever queries it. None of that is something to work out from a blog post; it needs a share scheme adviser or accountant who'll draft the option agreement and agree a defensible valuation with HMRC before you grant anything.

What you can get right yourself, from day one, is the record. Every EMI option needs to sit against an accurate, current share register showing exactly what's been granted, to whom, at what price, and when, because that register is what your adviser pulls from to file the annual return correctly and what a buyer's due diligence team will check against HMRC's records during any future sale.

How Founders Ledger helps

Founders Ledger keeps your statutory registers, including who holds what and since when, accurate as part of your everyday bookkeeping rather than something reconstructed from old emails and spreadsheets when a scheme adviser or a buyer's solicitor asks for it. When an EMI grant happens, having that cap table already correct means the annual return and any later BADR claim are built on records that were accurate on the day, not pieced together under time pressure.

You can see how it fits into the rest of your company's admin at foundersledger.co.uk.

This article is correct at the time of writing (October 2026) and is provided for general information only. It isn't financial, tax or legal advice. EMI eligibility, valuation and the surrounding compliance steps depend on your company's specific circumstances, and getting the option agreement and valuation wrong can be costly to unwind. Speak to a qualified accountant or share scheme adviser before setting up or granting EMI options.