The Enterprise Management Incentive (EMI) is an HMRC-approved share option scheme that offers significant tax advantages for both employers and employees. It’s a powerful way for businesses to attract, retain, and motivate top talent and it can be highly rewarding when used effectively.
What’s a share option scheme we hear you ask?
Share option schemes are like giving employees a golden ticket to buy company shares at a discount later, if they stick around and don’t burn the place down. It’s basically an employer saying, “Work hard, don’t quit, and one day you might own a sliver of this chaos.
Following? OK let’s get into the specifics!
For Employees: Tax-Advantaged Ownership
Here’s why EMI options are so appealing to employees:
- No income tax or National Insurance when the options are granted, or when they’re exercised — provided the shares are granted at market value.
- If the company grows in value, employees can buy shares at the original (lower) price. The increase in value up to that point is free of income tax and NI. Note: With an EMI scheme, companies can agree on a share valuation with HMRC beforehand, so everyone knows exactly how the tax benefits will apply and there are no surprises.
- When the shares are eventually sold, Capital Gains Tax (CGT) only applies to the growth in value after the options were exercised, not from the original grant date.
- The sale may also qualify for Business Asset Disposal Relief, reducing the CGT rate to 10% on up to £1 million of gains, if the EMI options were granted at least two years before the sale. Note: Tax rates and rules are correct at the time of writing, but may change in the future.
To qualify, employees must work at least 25 hours per week or dedicate 75% of their total working time to the company.
For Employers: Rewarding Staff While Reducing Costs
EMI schemes offer strong incentives for businesses too:
- Eligible companies can grant up to £250,000 in share options per employee, with a total company limit of £3 million.
- EMI options are a proven way to retain key staff and attract high-calibre talent, especially when paired with performance milestones or vesting schedules.
- Companies can claim corporation tax relief on the difference between the market value at exercise and the amount employees pay for their shares.
- No employer National Insurance contributions are due, provided the options are granted at market value.
There are certain conditions for the company to qualify for the EMI scheme:
Your company is eligible if:
- It’s an independent business (not under full control of another company)
- It’s unlisted (not traded on a stock exchange)
- Has fewer than 250 full-time employees
- Has gross assets under £30 million
- Doesn’t operate in excluded sectors (like banking, property development, etc.)
In summary: EMI schemes are one of the most tax-efficient and flexible tools available for start-ups and growing companies. If you’re building a team you want to stick around, this is worth a serious look.
👉 Ready to explore whether EMI is right for your business?
Get in touch with our team today to find out how you can set up a scheme that works for you and your employees and turn shares into a serious incentive for growth.
