Autumn Budget 2025: changes to Enterprise Management Incentives

The Chancellor’s Autumn Budget 2025 announced some significant changes to Enterprise Management Incentive (EMI) schemes, which will allow a broader range of companies to offer tax-advantaged EMI share options to their employees.

What are EMI options?

EMI share options are tax-advantaged options, designed to assist smaller and growing companies to attract and retain employees, without paying cash, via the grant of tax-efficient share options in the business.

The tax advantages mean that when share options are exercised no income tax or National Insurance contributions are payable. Instead, the employee would pay Capital Gains Tax (CGT) on the eventual sale of their shares. This is highly attractive since rates of CGT are lower than income tax rates. For a higher rate taxpayer, the prevailing income tax rate is 40% whereas the CGT rate is 24% which, if Business Asset Disposal Relief is available, would be further reduced to 14% (18% from 6 April 2026).

What are the proposed changes?

The Budget has removed various limits which currently restrict the companies that may offer EMI and will also benefit those companies that are already using EMI as an incentivisation tool.

From 6 April 2026, the following EMI limits will be increased:

• the overall company share option limit on the value of options that may be granted under EMI will be increased from £3 million to £6 million
• the eligibility criteria will be expanded from gross assets of £30 million to £120 million
• the maximum number of employees (which is also an eligibility criteria) will be increased from 250 employees to 500 employees; and  
• the exercise period (option life) limit will be increased from 10 years to 15 years. This change will also apply to existing unexercised options.

The changes do not impact on the individual limit for EMI which remains unchanged at £250,000 per employee.

From April 2027:

The requirement to notify the grant of EMI options to HMRC will be removed. Currently, companies are required to notify the grant of EMI option by 6 July after the end of the tax year in which the options were granted. While this is an administrative change, it is to be welcomed since failure to notify grants of EMI options on a timely basis may result in a loss of the tax reliefs on the exercise of options. The obligation to make annual returns in relation to EMI schemes will remain.

What do the changes to the exercise period (option life) mean for existing EMI options?

If a company has granted EMI options under existing arrangements, those options may be amended in accordance with the proposed changes without losing the tax advantages which EMI offers. As with any changes in legislation, the ‘devil is in the detail’. Before making any amendments to an existing option it will be necessary to ensure that:

• any amendments are made in accordance with the terms of the relevant scheme
• the amendments are consistent with the revised legislation
• the change will not take effect until after 6 April 2026, which is when the changes come into effect.

What does this mean for companies looking to grant EMI options?

From 6 April 2026, companies (or groups) that were prevented from granting EMI options because of the overall company share option limit or the eligibility criteria (or, had exceeded the above limit or eligibility criteria through growth and expansion) may now consider whether to offer EMI share options.

Overall, these changes are positive because they allow more companies to offer an incentive to their employees in the form of a tax advantaged share option.

Should you require any assistance with your company’s existing EMI share options or are considering the grant of EMI share option and want more information about how these changes may affect your business, please get in touch with a member of the employee incentives team.