More employers can now access the enterprise management incentive (EMI) scheme to reward and retain top talent. Welcomed changes in the November 2025 Budget have broadened eligibility, making it easier for organisations to offer employees a stake in future growth and success.
EMI options give employers a cost-effective way to attract and retain talent by offering employees a real stake in their growth. By linking rewards to performance and the growth of an organisation, EMI fosters long-term commitment and a sense of ownership, encouraging employees to think and act like shareholders. This drives innovation, productivity and loyalty. The changes to the EMI legislation have extended access to this scheme and simplified administration and management, making it easier than ever to build a culture of shared success.
The EMI scheme is a tax-advantaged share option designed for growing organisations as it allows staff to acquire shares with significant tax benefits. When qualifying EMI options with an exercise price equivalent to market value are exercised, there is no income tax or national insurance to pay.
Instead, capital gains tax (CGT) is payable on the gain when the shares are sold. For higher-rate taxpayers, the rate of CGT is 24%, compared to the income tax rate of 40%. This tax-efficient rate can be reduced further to 14%, and 18% from April 2026, if business asset disposal relief applies. This makes EMI a powerful tool for motivating employees, preserving cash, and aligning everyone with long-term business success.
From April 2026, there will be more flexibility for growing organisations. The EMI pool doubles to £6 million, meaning employers can reward more employees without draining cash, and the asset cap will increase from £30 million to £120 million so larger SMEs can qualify.
In addition, the full-time equivalent employee limit rises from 250 to 500, option life extends to 15 years, providing more time for employees to benefit and less pressure on exit. The individual cap is still a strong incentive for key contributors, despite it not being increased and remaining at £250,000.
From April 2027, administration will be easier, with fewer risks. HM Revenue and Customs (HMRC) grant notifications will be removed, ending compliance headaches or lost tax relief, and annual returns will remain, but the process will be simpler.
In summary, the 2025 Budget makes EMI more accessible and flexible, giving employers a cost-effective way to reward and retain talent while aligning employees with long-term growth.
Lisa Hayward is partner, head of employee incentives, and Freya Palmer is part of the employee incentives team at Birketts
