EMI Options Calculator UK 2025/26

EMI vs Other Share Schemes — Tax Comparison

EMI Options in the UK — Expert Guide

What Are EMI Options?

Enterprise Management Incentives (EMI) is the UK's most generous HMRC-approved share option scheme. It was specifically designed to help smaller, growth-oriented companies attract and retain talent by offering equity incentives that are exceptionally tax-efficient — far more so than RSUs, unapproved options, or even other HMRC-approved schemes like CSOP.

Under EMI, an employee receives the right to buy shares in their employer at a fixed price (the exercise price, also called the strike price) set at the time of grant. If the company grows and the shares increase in value, the employee can exercise their options and sell the shares at the higher price, keeping the gain after paying only 10% CGT — rather than income tax of up to 45% plus NI that would apply to an equivalent cash bonus.

EMI Qualifying Conditions — Company

For a company to grant qualifying EMI options, it must meet all of the following conditions at the time of grant:

• Independent: The company must not be a 51% subsidiary of another company, and no company or person should control the company (other than shareholders holding less than 30% of ordinary shares).
• Gross assets under £30 million: The gross assets of the company (and any group) must not exceed £30 million at the time of grant.
• Under 250 full-time equivalent employees: The company (and any group) must have fewer than 250 employees.
• Qualifying trade: The company must carry on a qualifying trade. Excluded activities include banking, property development and investment, leasing, farming, legal/accountancy services, and hotels/care homes. Most technology, manufacturing, and service businesses qualify.
• UK permanent establishment: The company must have a qualifying business in the UK.

EMI Qualifying Conditions — Employee

The employee receiving EMI options must also meet conditions:

• Committed time: The employee must work for the company for at least 25 hours per week, or at least 75% of their working time if less than 25 hours per week.
• Not a material interest: The employee must not hold a material interest in the company — meaning no more than 30% of the ordinary share capital (including options already held).
• Individual limit £250,000: The market value of unexercised EMI options at grant must not exceed £250,000 per employee. Options above this limit are not qualifying.

The £3 Million Company Limit

The total market value of unexercised EMI options across all employees must not exceed £3 million at any time. This is an aggregate cap for the entire company's EMI pool. Once this limit is reached, no further qualifying EMI options can be granted until existing ones are exercised or lapse.

HMRC Agreed Valuation (AMV)

Before granting EMI options, most companies obtain an Agreed Market Value (AMV) from HMRC's Shares and Assets Valuation team. This is not legally required, but it is strongly recommended as it locks in the exercise price and prevents HMRC from later challenging the valuation. For private companies, shares are typically valued on an earnings or asset basis. HMRC aims to agree valuations within 28 days. For early-stage companies with no revenue, the valuation is often very low — this is what makes EMI so powerful: you can grant options at pennies per share that may be worth pounds when the company exits.

Business Asset Disposal Relief (BADR) — The 10% CGT Rate

The critical tax advantage of qualifying EMI options is access to Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs' Relief. BADR reduces the CGT rate to just 10% on qualifying gains, subject to a lifetime limit of £1 million of gains per person.

For EMI options to attract BADR, two conditions must be met:

• The options must have been granted at least 2 years before the disposal (sale of shares).
• The company must still be a qualifying EMI company at the time of exercise.

Note: BADR was reformed in the October 2024 Budget. The rate increased from 10% to 14% from 6 April 2025, and will increase further to 18% from 6 April 2026. However, the Finance Act 2025 confirmed EMI options retain a 10% rate via a separate legislative provision — EMI holders still pay 10% CGT on qualifying gains regardless of the wider BADR rate changes.

Exercise Events — When Can You Exercise EMI Options?

EMI options can be exercised at any time after vesting (subject to any lock-up in the option agreement). Key exercise triggers include:

• Sale of the company (trade sale or merger): Most EMI schemes accelerate vesting on a change of control. You typically have a 90-day window from the acquisition completion to exercise and sell, preserving qualifying EMI treatment.
• IPO: Options can be exercised around the IPO, though any lock-up period may limit when you can actually sell the resulting shares.
• Leaving the company: This depends on whether you are a "good leaver" or "bad leaver" under your option agreement. Good leavers (e.g., redundancy, ill health, retirement) typically retain vested options for 90 days. Note: if you leave employment and do not exercise within 90 days, the options lose EMI qualifying status and become unapproved options — income tax and NI would apply.
• Company decision: The board can open an exercise window at any time.

Why EMI is Outstanding for Startup Employees

For a startup employee granted EMI options worth £250,000 at a company that grows 10x, the gain is £2.25 million (assuming the exercise price was equal to the grant-date value of £250,000). Under qualifying EMI with BADR, the CGT at 10% is £225,000. The same gain delivered as employment income would incur income tax of up to 45% plus NI — potentially £1 million or more in tax. EMI can therefore save hundreds of thousands of pounds in tax for employees of high-growth startups. It is widely regarded as one of the most employee-friendly equity compensation tools available globally.

HMRC Notification — 92-Day Deadline

After granting EMI options, the company must register the EMI scheme with HMRC and notify the grant within 92 days of the grant date. This is done via HMRC's Online Services platform. Missing this deadline causes the options to lose qualifying EMI status immediately — meaning they become unapproved options with income tax and NI on exercise. The 92-day notification requirement is strictly enforced and has caught many companies out. Most EMI specialists recommend notifying within 2 weeks of the grant date to be safe.