What is an EMI share option?

An Enterprise Management Incentive (EMI) option lets employees buy shares at a fixed price. Gains are taxed as CGT (10–24%) rather than income tax, making it highly tax-efficient.

When do you pay tax on EMI options?

No tax on grant. No income tax on exercise if exercised at or above market value. CGT applies on sale — 10% if you qualify for Business Asset Disposal Relief, otherwise 18% or 24%.

Do you need to work for 2 years for Business Asset Disposal Relief on EMI?

From April 2025, you need to have held the options for 2 years before disposal. BADR reduces CGT to 10% on the first £1 million of lifetime gains.

What if I exercise EMI options at a discount?

If you exercise below the agreed market value at grant, the discount is treated as employment income and taxed via PAYE. Above or at the agreed value = no income tax.

Can a startup grant EMI options?

Yes. The company must have gross assets under £30 million, fewer than 250 employees, and carry on a qualifying trade. Most startups qualify unless they are in excluded activities.

What happens to EMI options if the company is acquired?

Options typically vest and can be exercised on acquisition (exit event). If shares are sold immediately, CGT applies. You may qualify for BADR if you held options for 2+ years.

How does the CGT annual allowance affect EMI gains?

The CGT Annual Exempt Amount is £3,000 for 2026/27. Gains above this are taxed at 18% (basic rate) or 24% (higher/additional rate), or 10% with Business Asset Disposal Relief.

Do EMI options count towards the £20,000 ISA allowance?

No. EMI options are separate from ISA allowances. However, some employees transfer shares into a Stocks & Shares ISA immediately after exercise to shelter future growth from CGT.

How are EMI options different from unapproved options?

Unapproved options: gain at exercise taxed as income (up to 45%). EMI options: no income tax at exercise if at market value; only CGT on sale. EMI is far more tax-efficient.

What is the hold period discount for EMI BADR?

From April 2025, EMI option holders must hold options for 2 years from the date of grant to qualify for BADR 10% CGT rate. Holding the shares for 2 years after exercise also qualifies.

Does National Insurance apply to EMI options?

If exercised at or above market value at grant: no NIC. If exercised at a discount: employee and employer NIC apply to the discount element treated as employment income.

EMI Share Options Calculator

Q: What is the EMI option limit?

Each employee can hold up to £250,000 of unexercised EMI options at any time. The company limit is £3 million of unexercised options outstanding.

Enterprise Management Incentives — CGT and take-home calculator

EMI Option Calculator

Number of Options

Exercise Price per Share (£)

Sale Price per Share (£)

Market Value at Grant (£)

CGT Rate

CGT Annual Exempt Amount (£)

What Are EMI Share Options?

Enterprise Management Incentives (EMI) are HMRC-approved share option schemes designed for growing SMEs. They let you reward key employees with the right to buy shares at a fixed (exercise) price, with generous tax advantages. No income tax or NIC at exercise (if granted at market value). Only CGT applies when shares are sold.

Key EMI Tax Rules 2026

Grant: No tax event
Exercise: No income tax if exercised at or above agreed market value at grant. NIC/income tax on any discount below grant-day market value.
Sale: CGT on (sale price − exercise price) × shares. Rates: 10% with BADR (2-year option hold required), 18% basic, 24% higher rate.
Annual Exempt Amount: First £3,000 of gains each tax year tax-free.

Frequently Asked Questions

What is the EMI option limit?

Can I transfer EMI shares to an ISA?

Do I need to notify HMRC about EMI options?