Glossary · UK
What is Enterprise Management Incentives (EMI)?
A tax-advantaged share option scheme for smaller UK companies that lets qualifying employees acquire shares at a fixed price with significant Income Tax, National Insurance, and Capital Gains Tax advantages.
Full Definition
Enterprise Management Incentives (EMI) is the most widely used tax-advantaged employee share option scheme for small and medium-sized UK companies, particularly start-ups and scale-ups seeking to attract and retain staff without large cash salaries. To qualify, the company must have gross assets of £30 million or less, fewer than 250 full-time equivalent employees, carry on a qualifying trade (certain activities such as banking, property development, and legal services are excluded), and not be under the control of another company. Each employee can be granted options over shares worth up to £250,000 (at the date of grant), with a total company-wide limit of £3 million of unexercised EMI options outstanding at any time. Provided the scheme is set up correctly and a valuation is agreed with HMRC in advance (via a VAL231 submission), no Income Tax or National Insurance is due when the option is granted or when it is exercised, as long as the exercise price is at least equal to the market value agreed with HMRC at grant. If options are granted at a discount to market value, Income Tax and NI apply on the discount at exercise. When the shares are eventually sold, gains are subject to Capital Gains Tax rather than Income Tax, and the option holding period counts towards the qualifying period for Business Asset Disposal Relief, potentially reducing the CGT rate to 14% for 2025/26 (rising to 18% from April 2026) on gains up to the £1 million lifetime limit, rather than the standard 18%/24% rates. Companies must notify HMRC of each EMI option grant within 92 days of grant via an EMI notification on the ERS online service, and must file annual returns; missing the 92-day deadline causes the option to lose its tax-advantaged status.