The Chancellor’s Autumn Budget 2025 contained a number of significant announcements for UK businesses. Please see here for our thoughts on the key points from an employment, incentives and pensions perspective. One of the most impactful announcements for growth companies is an expansion of the UK’s Enterprise Management Incentive (EMI) scheme, signalling a clear intention to bolster the UK's status as an attractive hub for start-ups and scale-ups. This follows a broader trend of enhancing the UK’s equity incentive framework to compete on the global stage, particularly in the tech sector.
Refresher: What are EMI options?
EMI is one of the UK’s flagship tax-advantaged share option plans, designed to help smaller, high-growth companies attract and retain employees by offering them tax-efficient options over shares in the business.
The tax benefits can be significant: typically, if structured correctly, no income tax or National Insurance (social security) contributions are payable when the options are exercised. Instead, the employee is subject to Capital Gains Tax on the disposal of the shares. In the UK, the distinction between tax rates for employment income and capital gains is meaningful, making EMI a highly attractive form of compensation.
What's changing?
The Budget revealed a series of enhancements that will allow more companies to benefit from the EMI scheme. The changes will be rolled out in two phases:
From April 2026, the following limits will be increased:
- Company size: The eligibility criteria will be expanded to include companies with up to 500 employees (previously 250) and gross assets of up to £120 million (previously £30 million), extending the benefits of EMI beyond start-ups to larger, fast-growing "scale-up" businesses.
- Company share option limit: The total value of EMI options a company can grant, calculated on the date the options are granted, will double to £6 million.
- Option life: The maximum period an EMI option can be held before it must be exercised will be extended to 15 years, which will also apply to existing unexercised EMI options. This recognises the growing trend for companies to stay private for longer, mitigating the risk of EMI options being timed-out before a company is ready for sale or IPO.
From April 2027, in a move to simplify administration:
- Notification requirement: The requirement to notify the UK tax authority (HMRC) of an EMI option grant within 92 days will be removed entirely. While a seemingly minor administrative point, the notification requirement has been a trip hazard for some companies who have faced the potential loss of the tax benefits for their EMI optionholders because of failing to notify in time.
Why is this significant?
As a result of these changes, it is likely that more employers will be able to use EMI options for longer, rather than companies needing to look to other retention tools as they grow and scale. It also means that more employees within a company will be able to benefit from EMI options, helping to bridge what can otherwise become a stark divide between employees who are with a company when it is first set up and those who join in its second wave of growth.
What's next?
The government's focus on employee share incentives doesn't stop there. A call for evidence was also launched on the same day as the budget on broader tax support for founders and scaling companies, which envisages further reform of EMI options and Company Share Option Plans (known as CSOPs, another form of UK tax qualifying share scheme for companies that have outgrown the EMI arrangement). This suggests that today's announcements are part of a wider, ongoing strategy to enhance the UK’s employee equity culture, which will be welcomed by scaling companies looking to attract, retain, and motivate the key talent needed to succeed.
For more information on how these changes might affect your business, please speak to the authors of this blog post or your usual Freshfields contact.
