If someone told you a few years ago that your company was too big for EMI share options, that answer is now out of date. On 6 April 2026 the government doubled the amount of equity a company can put under EMI option, quadrupled the gross assets ceiling, and lifted the employee cap from 250 to 500. Companies that were shut out of the most useful share scheme in the UK are back in scope, and most of them have not noticed.
TL;DR: From 6 April 2026, EMI companies can have fewer than 500 employees, up to £120m of gross assets, and £6m of shares under option. The £250,000 individual limit is unchanged. Options must be notified to HMRC by 6 July following the tax year of grant, and an annual return is due every 6 July even if nothing happened.
What Changed for EMI Options on 6 April 2026?
Four limits moved at once. The employee cap rose from 250 to 500 full-time equivalents, the gross assets test went from £30m to £120m, the total value of unexercised options a company can have outstanding went from £3m to £6m, and the maximum exercise window stretched from 10 years to 15 (HMRC ETASSUM50500, 2026).
The increased limits apply to options granted on or after 6 April 2026. HMRC costed the change at £70m in 2026-27, rising to £695m by 2030-31 (HMRC policy paper, 2026). A giveaway that size is aimed at scale-ups rather than start-ups, which is exactly who the old £30m assets test kept out.
There is one carve-out. Northern Ireland companies trading in the generation, transmission, distribution or supply of electricity keep the old limits, because of subsidy control commitments.
Does Your Company Actually Qualify?
Five company-level tests have to be met at the date of grant. The company must be independent rather than a 51% subsidiary, carry on a qualifying trade, have a UK permanent establishment, employ fewer than 500 full-time equivalents, and hold gross assets of no more than £120m. A sixth limit sits at scheme level: no more than £6m of unexercised EMI options outstanding.
The trade test is where most refusals happen. Excluded activities include banking, insurance, money-lending, dealing in land or shares, leasing, receiving royalties or licence fees, property development, farming, forestry, shipbuilding, coal production, and providing legal or accountancy services (Vestd, 2026). A trade fails only if excluded activities are a substantial part of it, which HMRC treats as more than 20%.
In our experience the gross assets figure catches people out more than the headcount. It is measured across the whole group, and a recent funding round sitting in the bank counts. Check it before you grant, not after.
Employee Eligibility Rules Have Not Changed
Each option holder must work at least 25 hours a week for the company, or spend at least 75% of their total working time on it. Anyone holding a material interest of 30% or more, counted together with associates, is barred. The individual limit stayed at £250,000 of shares under option, measured at grant-date market value.
The wider limits have not yet produced wider participation. HMRC's July 2026 statistics show 18,570 companies operating an EMI scheme in 2024-25, up 12.8% over three years, while the number of employees receiving grants fell from 50,000 to 42,000 (Vestd analysis of HMRC data, 2026). Average value per employee climbed 14.7% to £13,930, so schemes are growing while grants concentrate on fewer people. EMI now accounts for around 90% of all UK companies running a tax-advantaged scheme.
How Are EMI Options Taxed?
There is no income tax or National Insurance on grant, and none on exercise either, provided the option was granted at a market value agreed with HMRC beforehand. The employee is taxed only when they sell, and then under capital gains tax rather than as employment income.
That is where the real benefit sits. EMI shares can attract Business Asset Disposal Relief at 18% for disposals on or after 6 April 2026, against 24% for a higher-rate taxpayer on a standard disposal. Two EMI-specific easements make this far easier to reach than on ordinary shares: the usual 5% personal-company shareholding test does not apply, and the two-year clock runs from the date the option was granted, not from exercise. BADR remains capped at a £1m lifetime limit, so read our guide to BADR at 18% and the lifetime limit before assuming the relief is available.
Grant at a discount to market value and the discount becomes taxable as income at exercise, so the valuation agreed with HMRC is worth getting right.
What Must You Report to HMRC, and When?
There are three separate obligations, all easy to miss. Register the scheme through HMRC's ERS online service. Notify each grant by 6 July following the end of the tax year in which it was made, a rule that replaced the old 92-day window for options granted on or after 6 April 2024 (HMRC guidance, 2026). Then file an annual return by 6 July every year for every registered scheme, including a nil return in a year when nothing happened.
Miss the annual return and a £100 penalty is automatic, followed by £300 at three months late, a further £300 at six months, and £10 a day beyond nine months (ICAEW, 2026). HMRC issues no reminder and no notice to file. Miss the grant notification and the consequence is worse than a penalty: the options can lose their tax-advantaged status entirely.
What changes in April 2027
For options granted on or after 6 April 2027, the separate grant notification disappears. Grant details will instead be reported through the EMI annual return, starting with the 2027-28 return, which falls due on 6 July 2028 under the normal timetable. Draft legislation was published on 13 July 2026 with technical consultation open until 7 September 2026 (HMRC, 2026).
Where Companies Get EMI Wrong
What we see most often is a scheme set up properly and then left alone. Nobody tracks disqualifying events, and there are several: the company losing independence after an acquisition, a key person dropping below the 25-hour working time requirement, or a change to the terms of the option itself. A disqualifying event starts a 90-day clock, and options not exercised within it lose part of their relief.
The other recurring problem is valuation drift. An HMRC-agreed EMI valuation holds for 90 days from the date of the agreement letter, so a company granting a second tranche months later on the old numbers is creating an income tax charge nobody has budgeted for. Both problems are cheap to avoid and expensive to unpick once an employee has exercised.
Frequently Asked Questions
Can we increase options granted before April 2026 to the new limits?
Existing option contracts can be amended without losing their tax advantages, provided the amendment is in line with the legislation. The extended 15-year exercise period is the change most worth revisiting. Take advice on the drafting, because a badly worded variation can itself be a disqualifying event.
Do we need HMRC to agree the share valuation?
It is not compulsory, but going without it is a real risk. Apply on form VAL231 with a supporting valuation report to HMRC's Shares and Assets Valuation team, which usually takes four to six weeks to respond. That agreement is what protects the employee from an income tax charge at exercise, and it holds for 90 days, so time the grant to land inside the window.
What if our company grew past the limits after we granted options?
The tests apply at the date of grant. Growing beyond 500 employees or £120m of gross assets afterwards does not retrospectively spoil options already granted, though it does stop you granting new ones.
Does EMI work for a company with no plans to sell?
It can, but the value to employees is realised on sale, so an option with no realistic exit is a weak incentive. Companies in that position often look at growth shares or a Share Incentive Plan instead. Owner-managers weighing how to extract value should also read our guide on salary versus dividends for 2026-27.
Are directors eligible for EMI options?
Yes, provided they meet the working time requirement and do not hold a material interest of 30% or more. That last test rules out most founders. Directors should also check how any resulting shareholding interacts with their Self Assessment reporting obligations.
If you are wondering whether the April 2026 changes have brought your company back into EMI range, we can run the gross assets, headcount and trade tests against your latest figures. Get in touch and we will look at it with you, or read more about our advisory and tax services.