Tax

EMI Share Options in 2026: Bigger Limits, a Longer Runway, and the HMRC Valuation That Holds It All Together

UK EMI share options expanded on 6 April 2026: higher company limits, 15-year terms, and the HMRC valuation founders still need to keep the tax break.

By 409.AI Team - 2026-07-16

The Enterprise Management Incentive is the most founder-friendly employee share scheme in the UK, and on 6 April 2026 it got more generous. If you run a UK company, or a US-based startup with a British subsidiary and employees in London, Manchester, or Edinburgh, the rules that decide who can qualify and how much you can hand out just changed in your favor. Here's what moved, what stayed put, and why the valuation you agree with HMRC still does most of the heavy lifting.

What EMI actually is

EMI options let a qualifying company grant share options to employees with a tax treatment that no US plan quite matches. Grant an option with an exercise price at or above the shares' agreed market value on the day of grant, and there's no income tax and no National Insurance when the option is granted or when it's exercised. The employee's only tax event is Capital Gains Tax when they eventually sell, often at the reduced Business Asset Disposal Relief rate.

Compare that to a US employee holding an incentive stock option, who can trip the Alternative Minimum Tax at exercise, and the appeal is obvious. EMI packs the upside of an option into a single, deferred, lower-rate tax event. That's why nearly every venture-backed UK startup uses it.

The catch is that the tax break is conditional. The company has to qualify, the employee has to qualify, and the exercise price has to be set against a value that HMRC has agreed. Get any of those wrong and the scheme can lose its advantaged status.

What changed on 6 April 2026

The Autumn 2025 Budget expanded EMI meaningfully. For options granted on or after 6 April 2026, four numbers moved:

• **Employee headcount.** A qualifying company can now have fewer than 500 full-time-equivalent employees, up from fewer than 250. That roughly doubles the size of company that can still open or keep an EMI plan.
• **Gross assets.** The gross assets ceiling rose from £30 million to £120 million. Later-stage scaleups that had grown past the old limit are back in scope.
• **Overall scheme limit.** The total unexercised EMI options a company can have outstanding, measured by the market value of the shares at grant, increased from £3 million to £6 million.
• **Exercise window.** The maximum life of an EMI option extended from 10 years to 15 years. Options that would otherwise have lapsed before an exit now have more room.

One more change is already scheduled. From 6 April 2027, the requirement to notify HMRC of each EMI grant is being removed altogether, with the legislation slated for Finance Bill 2027. That's an administrative simplification, not a loosening of the substance. Until then, notification still bites. Since 6 April 2024, you no longer have the old 92-day-from-grant window; instead, EMI grants must be reported by 6 July following the end of the tax year in which they were made, aligned with the annual employment-related securities return. Miss it and the options can lose their EMI status, which remains one of the most common ways companies accidentally forfeit the tax treatment.

Taken together, these changes push EMI up-market. A company that raised a Series B and crossed the old headcount or gross-assets tests can now grant fresh EMI options where before it would have been forced into an unapproved plan or a Company Share Option Plan.

What did not change

Plenty of the framework stayed exactly where it was, and this is where founders trip up by assuming the 2026 expansion touched everything.

The individual limit is still £250,000. Any one employee can hold EMI options over shares worth up to £250,000 at the date of grant, and that figure did not move. The working time requirement is unchanged: an employee must spend at least 25 hours a week, or if less, 75% of their working time, on the business. The material interest bar still applies, so anyone who already holds more than 30% of the ordinary share capital can't be granted EMI options.

The company also still has to carry on a qualifying trade. EMI excludes a familiar list of activities, including banking and finance, insurance, property development, farming, legal and accountancy services, and running hotels or nursing homes. A software or hardware startup clears this easily; a fintech should check where its actual revenue-generating activity sits, because "financial activities" is a genuine gray area.

The HMRC valuation: AMV, UMV, and Form VAL231

Here's the part 409.ai lives in. Before you grant EMI options, you want an agreed market value from HMRC's Shares and Assets Valuation team, and you get it by submitting Form VAL231.

The form asks for two figures. The Actual Market Value (AMV) is the value of the ordinary shares taking into account any restrictions attached to them, such as leaver provisions or transfer limits. The Unrestricted Market Value (UMV) ignores those restrictions. AMV is what you set the exercise price against; UMV matters for testing the £250,000 individual limit and the £6 million scheme limit. For most startups, the restrictions on employee ordinary shares push AMV below UMV, which is a legitimate discount, not a trick.

If you've read our explainer on [why a 409A valuation differs from fair market value](https://409.ai/articles/409a-valuation-vs-fair-market-value), the logic will feel familiar. In both systems, employee common (or ordinary) shares are worth less than the price a preferred investor just paid, because they sit behind that investor in the payout order and carry restrictions the investor's shares don't. The same reason a US [409A comes in below your post-money valuation](https://409.ai/articles/why-is-your-409a-valuation-lower-than-post-money-valuation) explains why a defensible EMI AMV sits below your last round price. An appraiser models the capital structure, applies the liquidation waterfall, and allocates value to the ordinary shares.

Once HMRC agrees the value, the letter is valid for 90 days. You have to grant the options inside that window, or the agreement lapses and you're back to square one. If your grant date is slipping, SAV will sometimes extend by a further period if you call before it expires, but plan on 90 days and don't let a board-approval delay burn the agreement.

Setting the strike price right

Why does the agreed value matter so much? Because the whole income-tax exemption hinges on it. Grant the option with an exercise price at or above AMV, and there's no income tax on the discount when the employee exercises. Grant it below AMV, and the employee pays income tax on the difference between AMV and what they paid, at exercise.

Work an example. Say AMV is agreed at £2.00 a share and an employee has an option over 50,000 shares.

• Strike at £2.00 (equal to AMV): no income tax at grant or exercise. Clean EMI treatment.
• Strike at £1.00 (below AMV): the £1.00 per share discount, £50,000 in total, is charged to income tax on exercise, and if the shares are readily convertible, National Insurance applies too.

Neither option is disqualified from EMI, but the discounted grant drags an income-tax charge into what should have been a pure capital gain. Founders sometimes set a low strike thinking they're being generous, then hand their team a tax bill they didn't see coming. A defensible AMV, agreed with HMRC, is what lets you price cleanly and sleep at night.

The tax at exit: BADR at 14%, then 18%

When the employee finally sells, the gain is subject to Capital Gains Tax, and EMI shares get special access to Business Asset Disposal Relief. Normally BADR requires you to hold at least 5% of a "personal company," but EMI shares are exempt from that test. The main condition is that the option was granted at least two years before the disposal. That two-year clock runs from grant, not exercise, which is why "exit-only" EMI options, exercised immediately before a sale, can still qualify if the original grant was old enough.

BADR isn't as cheap as it used to be. The rate rose to 14% for disposals in the tax year ending 5 April 2026, and it climbs to 18% for disposals made on or after 6 April 2026. The £1 million lifetime gains limit remains. So an employee selling qualifying EMI shares after 6 April 2026 pays 18% on gains within that lifetime allowance, versus the 24% main CGT rate. Still a real saving, just a narrower one than the 10% BADR of a few years ago.

EMI vs the US stack, for dual-jurisdiction cap tables

A lot of 409.ai's readers run cap tables that straddle the Atlantic: a Delaware C-corp parent, a UK subsidiary, employees on both sides. If that's you, it's worth being precise that EMI and the US option regime are separate systems with separate valuations.

Your UK employees on EMI need an HMRC-agreed AMV. Your US employees on incentive or non-qualified options need a 409A valuation to set their strike, and the [tax treatment of ISOs versus NSOs](https://409.ai/articles/iso-vs-nso-how-stock-options-are-taxed) follows entirely different rules than EMI's. One agreed value doesn't cover both jurisdictions. The economics of what an option is worth, though, come from the same place, and our guide to [what your stock options are really worth](https://409.ai/articles/understanding-409a-valuation-for-employees) applies on either side of the water. US founders weighing an early-exercise-and-[83(b)-election](https://409.ai/articles/the-83b-election-explained-for-founders) strategy should note that EMI has no direct equivalent; its deferral is baked into the scheme itself rather than elected by the employee.

The practical point: budget for two valuations, on two clocks, with two sets of rules, and don't let a US 409A masquerade as UK evidence or vice versa. HMRC won't accept a 409A in place of a VAL231, and the IRS won't take an AMV letter.

What to do now

If your company grew past the old EMI limits, re-run the eligibility test against the 2026 numbers before you assume you're locked out. Fewer than 500 employees and gross assets under £120 million covers a lot more scaleups than it did last year. If you're already granting under EMI, keep the discipline that's always mattered: agree the AMV with HMRC on Form VAL231, grant inside the 90-day window, set the strike at or above AMV, and notify each grant on time until the 2027 rules retire that step. The expansion gives you more room to reward your team. The valuation is still what turns that room into a clean, defensible tax position.

If you need a defensible EMI valuation, that's exactly the report 409.ai produces for HMRC's VAL231 process. And if your cap table crosses into the US, we handle the 409A side too.

*This article is educational and not tax advice. EMI rules and rates are set by HMRC and can change; confirm current figures against GOV.UK and speak to a qualified adviser before granting options.*