Autumn Budget: Expansion of the EMI eligibility limits

As part of the Autumn 2025 Budget, the Chancellor has announced the expansion of the Enterprise Management Incentive scheme (EMI), a UK tax-advantaged share option scheme for smaller, high-growth companies, which if properly structured, enables employees to exercise options without incurring income tax or NICs, with gains typically taxed at lower rates under the capital gains tax regime.

Background

Currently, in order to qualify for EMI, a company must have gross assets of £30 million or less and fewer than 250 employees. Employees must also satisfy a “working time” test (broadly, employees must spend at least 25 hours per week working for their employer or 75% of their working time), and options must be over ordinary shares. There have also been long standing limits which restrict the extent to which options can benefit from tax advantages. Specifically there is a £250,000 cap on options granted per employee, a £3 million cap on unexercised options across the company, and a 10 year window to exercise options.

The policy rationale for EMI has always been to support scaling companies recruit, retain and reward key employees by offering tax advantages and aligning employee and shareholder interests. Whilst a popular and competitive scheme, over time, reports commissioned by HMRC have found these limits mean the current regime does not reflect the way in which modern scale ups grow over time, with many promising companies being forced out of EMI just as their hiring needs increases and competition for talent intensifies. Therefore, whilst the underlying policy intent remained valid; the market called for an expansion on the limits (see our recent update here on this) and the Chancellor has responded.

Expansions to the EMI limits

In the 2025 Autumn Budget, the Chancellor announced a significant expansion of some of the EMI eligibility requirements.  

The key changes, which will apply to EMI options granted on or after 6 April 2026, are:

• The company wide unexercised options cap doubles from £3 million to £6 million;
• The gross assets ceiling quadruples from £30 million to £120 million; and
• The employee headcount threshold rises from 250 to 500 employees.

Additionally, for options granted on or after 6 April 2026 and, importantly, for existing options that have not expired or been exercised (provided they are amended in line with the legislation without losing tax advantages):

• the maximum option life extends from 10 to 15 years

These changes should increase the number of companies eligible for EMI, and extend the advantages afforded by EMI for companies that have already granted EMI options.

Why are the changes being made

The reforms are expressly aimed at solving the mid to late stage growth challenge for UK businesses. As set out in the Budget Entrepreneurship Prospectus, the UK remains a strong choice for start ups but struggles to scale at US pace. To make the UK a more attractive place for companies to grow and remain, the government is deploying targeted changes to EMI as a lever to catalyse investment and help businesses attract and retain talent.

The expansion of the EMI scheme can assist in the attraction and retention of talent by assisting smaller firms competing against global peers with deeper resources. By doubling headcount and option limits and increasing the gross assets cap, the changes preserve EMI eligibility at the point when equity is most valuable for hiring and retaining critical teams, enabling employers to offer competitive total reward and align incentives.

The Prospectus also acknowledges that some of the UK’s leading companies relocate or list overseas to access capital and talent. The expansion of EMI is also intended to entrench its position as a world leading incentive scheme, making the UK a more compelling place for businesses to start, scale and stay.

EMI notification requirement

A further change announced to the EMI scheme is the removal of the EMI notification requirement from April 2027. This will be legislated in Finance Bill 2026-27.

The removal of the requirement to notify HMRC after the grant of EMI share options will also be welcomed as a positive change by reducing administrative barriers that disproportionately affect smaller businesses. 

The unchanged £250,000 individual cap

Against this progress, one constraint remains fixed: the £250,000 individual limit, which has not increased since 2012.

For many scale ups competing against listed companies and multinationals, higher individual headroom would make EMI a stronger, more competitive part of total compensation for critical hires without straining cash. Retaining the £250,000 cap therefore feels like a missed opportunity in the government’s journey to help smaller companies access talent.

Summary

Overall, the changes announced in the Budget are a meaningful, market-supported expansion of EMI that should bring additional scale ups within the scheme and supports growth companies within the UK. However, if the policy goal is to help high growth UK companies win the global war for talent, increasing the individual cap should be next on the list.

Growth companies who have previously outgrown their EMI schemes or discounted EMI entirely on the basis of their size should revisit their equity incentive strategies to consider whether it now makes sense to delay making new equity awards until April 2026 in order to benefit from the significant range of attractive EMI tax advantages. Once further details have been provided by the Government, existing EMI schemes should also be reviewed to establish the extent to which the option exercise period can be extended from 10 to 15 years whilst retaining EMI tax benefits.