EMI share options: the new limits from 6 April 2026 and the filing deadlines

By Buzz Accounting · 13 August 2026

Startups use share options to recruit people they cannot yet pay a market salary. For example, an engineer might accept £20,000 a year below the market rate in return for options over shares.

Under the Enterprise Management Incentive (EMI) scheme, an employee usually pays capital gains tax when they sell the shares. Without EMI, the employee can owe income tax and National Insurance when they exercise the option, which may be before they can sell any shares. On 6 April 2026 the scheme's limits increased, and the filing rules, under which a missed deadline loses the relief, stayed the same.

What changed on 6 April 2026

Four of the qualifying limits increased.

The total unrestricted market value of options a company may have outstanding rose from £3 million to £6 million.
The gross assets test rose from £30 million or less to £120 million or less.
The employee limit rose from fewer than 250 full-time equivalents to fewer than 500.
The maximum exercise period rose from 10 years to 15 years from the date of grant.

The first three apply only to options granted on or after 6 April 2026. Existing option contracts can be amended to run for up to 15 years without losing their tax advantages. This matters to a company that granted options in 2016 or 2017 and has had no sale or listing at which they could be exercised, because those options reach the ten-year limit in 2026 or 2027.

A company registered in Northern Ireland that trades in goods or supplies electricity keeps the old limits and the old exercise period, because of the UK's international subsidy control commitments. Such a company should plan on the £3 million limit and a ten-year exercise period.

What did not change

The £250,000 individual limit is unchanged. One employee can hold EMI options over shares worth up to £250,000 at the date of grant, measured on unrestricted market value (the value ignoring any restrictions attached to the shares), and any Company Share Option Plan options they hold count towards the same £250,000. There is also a rolling three-year rule: once an employee has been granted £250,000 of EMI options, no further EMI grant can be made to them for three years, even if some have been exercised or have lapsed.

The company must still be independent, which means not under the control of another company, and must carry on a qualifying trade with a permanent establishment in the UK. Several trades are excluded, including property development, financial activities, legal and accountancy services, leasing and farming. Most software, hardware and consumer product startups are not affected, but check the full list of excluded activities before granting options.

Who can hold the options

An eligible employee must work for the company for at least 25 hours a week, or, if they work less, at least 75% of their total working time must be for the company or group. The test uses average working time, so it allows for flexible hours, but it excludes an adviser who works one day a month or a part-time chief technology officer who also works for three other companies. Those people can be given unapproved options, which are taxed as described below.

An employee with a material interest, meaning more than 30% of the ordinary share capital, is not eligible, which rules out most founders.

Worked example: EMI options compared with unapproved options

The figures below are illustrative. The tax rates are those for 2026/27.

Maya is employee number six at a seed-stage company selling software to businesses. In June 2026 she is granted EMI options over 20,000 shares. HMRC agrees an actual market value of £1.00 a share, and the exercise price is also £1.00, so there is no discount. The unrestricted market value is £1.25 a share, so the grant uses £25,000 of her £250,000 limit. Her salary is £55,000.

Four years later the company is sold at £9.00 a share. Maya exercises and sells: proceeds £180,000, cost £20,000, so a gain of £160,000.

With EMI

There is no tax when the option is granted, and none when it is exercised, because the exercise price was at least the agreed market value at the date of grant.
The whole £160,000 is a capital gain. The annual exempt amount is £3,000, leaving £157,000.
Business Asset Disposal Relief applies, because the options were granted more than two years before the sale and she was an employee throughout. EMI shares do not have to meet the usual requirement to hold at least 5% of the company.
The relief gives a rate of 18% for disposals on or after 6 April 2026, up to a £1 million lifetime limit. Tax: £157,000 × 18% = £28,260.

Without EMI: the same options, unapproved

At exercise, the £160,000 difference between market value and what she paid is employment income. Shares in a company that is being sold can be turned into cash straight away (they are readily convertible assets), so the income goes through payroll with PAYE and National Insurance.
Added to her £55,000 salary, the £160,000 is taxed partly at 40% and mostly at 45%, and she loses her personal allowance. The extra income tax is £73,521.
Employee National Insurance at 2% on £160,000 adds £3,200. Total: £76,721.
Employer's National Insurance at 15% is another £24,000. Unapproved option agreements commonly pass this to the option holder through a joint election, and if it is passed to her, Maya's bill is £100,721.
There is then no capital gain on the immediate sale, because the £160,000 taxed as income is added to her base cost, making it £180,000.

On the same shares and the same sale, Maya pays £28,260 with EMI and £76,721 without it. If the employer's National Insurance has been passed to her, she pays £100,721 without EMI, which is £72,461 more than with it.

The company gets the same corporation tax deduction in both cases, equal to the employee's gain at exercise of £160,000, which is worth £40,000 at the 25% main rate.

The two deadlines that can lose the relief

A company can meet every qualifying test and still lose EMI relief by missing one of these deadlines.

1. The valuation expires after 90 days

You do not have to agree a share valuation with HMRC before granting EMI options, but you should, because the agreed actual market value is what protects the employee from an income tax charge at exercise. An HMRC valuation agreement letter is valid for 90 days, and only for as long as nothing material changes in the company's circumstances in the meantime. Closing a funding round within the 90 days ends the agreement.

A common problem is a company that agrees a valuation in February, spends four months negotiating option terms with a lawyer, and grants in July against a letter that expired in May. Ask HMRC for the valuation once the option documents are nearly finished.

2. The notification deadline is 6 July after the tax year of grant

Every EMI grant must be notified to HMRC through the Employment Related Securities online service. The deadline is 6 July following the end of the tax year in which the option was granted, so options granted at any point in 2026/27 must be notified by 6 July 2027. If the deadline is missed, the option is not a qualifying EMI option and is taxed as an unapproved option, as in the example above.

The scheme has to be registered on the Employment Related Securities (ERS) online service before any grant can be notified, and registration takes time. A separate annual ERS return is due by 6 July every year for every scheme that is still open, including a nil return for a year in which nothing happened. A late annual return gets an automatic penalty, starting at £100.

Disqualifying events and the 90-day rule

Certain events stop an option qualifying from the date they happen. The common ones are the company ceasing to meet the independence or trading tests, a change of control, and an employee dropping below the working-time requirement. Once a disqualifying event occurs, the employee has 90 days to exercise with the tax advantages preserved. If the option is exercised later than that, the growth in value since the disqualifying event is taxed as employment income.

A change of control when the company is bought is normally dealt with in the sale timetable. An employee who cuts their hours to two days a week is easier to miss, and if nobody notices until a sale several years later, the 90 days will long have passed.

What to do this month

If you granted options in 2025/26, confirm every one of them was notified by 6 July 2026, and check that your annual ERS return for the year was filed by the same date.
If you have options granted in 2016 or 2017 approaching a ten-year expiry, look at amending the contracts to the new 15-year period before anyone's options lapse unexercised.
Check every current option holder against the working-time test of 25 hours a week or 75% of working time, and speak now to anyone who has gone part-time since their grant.
If you are close to the old £3 million ceiling and had capped your pool because of it, re-model the pool against £6 million before your next hiring round.
Check whether your last funding round pushed gross assets over £30 million. If it did and you stopped granting EMI options for that reason, you may be able to grant them again under the new limits.
Before the next grant, get the valuation agreed with HMRC and set the grant date within the 90 days. Put 6 July in the calendar as a yearly deadline.

Where we help

We agree the valuation with HMRC, register the scheme, notify each grant before the deadline and file the annual return on time. We also work out what a grant could be worth to the employee receiving it, so you can explain the offer. If you are comparing options with a higher salary, our post on the cost of a first hire covers the salary side, and our post on SEIS and EIS covers tax relief for investors in the same company. Setting up an EMI scheme is £2,950 + VAT, including the HMRC-agreed valuation and the notification, and the annual return is £295 + VAT a year. See how we handle EMI. Your monthly accounting fee comes from the instant quote. Get started.

Common questions

What are the EMI limits from 6 April 2026?

For options granted on or after 6 April 2026, a company can have up to £6 million of EMI options outstanding by unrestricted market value, must have gross assets of £120 million or less, must have fewer than 500 full-time equivalent employees, and can set an exercise period of up to 15 years. Before that date the figures were £3 million, £30 million, 250 employees and 10 years. The individual employee limit is unchanged at £250,000. Northern Ireland companies trading in goods or the provision of electricity keep the old limits under the UK's subsidy control commitments.

Can we extend existing options to the new 15-year exercise period?

Yes. The longer maximum exercise period of 15 years, up from 10, is the one change that can be applied to options already granted, by amending the contracts, without losing the tax advantages. The other three changes, the £6 million company limit, the £120 million gross assets limit and the 500-employee test, apply only to options granted on or after 6 April 2026. The extension matters most to companies that granted options in 2016 or 2017 and have had no sale or listing, because those options are close to their ten-year limit.

What is the deadline for notifying an EMI option grant to HMRC?

6 July following the end of the tax year in which the option was granted. Options granted at any point in 2026/27 must be notified by 6 July 2027, through the Employment Related Securities (ERS) online service. If the deadline is missed, the option is not a qualifying EMI option and the employee is taxed as if it were unapproved, paying income tax and National Insurance on the full gain at exercise where they would otherwise pay capital gains tax on the sale. The scheme must be registered on the ERS service before any grant can be notified, and registration takes time, so allow for it.

How long is an HMRC share valuation valid for EMI?

90 days from the date of the agreement letter, and only while nothing material changes in the company's circumstances. Closing a funding round, signing a major contract or losing your largest customer within the 90 days all end it. A common problem is agreeing a valuation early, spending months on legal drafting, and granting against a letter that expired weeks earlier. Ask for the valuation once the option documents are nearly finished, and grant the options soon after it is agreed.

How much tax does an employee pay on EMI shares?

No tax is due at grant, or at exercise provided the exercise price was at least the agreed market value at grant. Capital gains tax is due on the eventual sale. Where Business Asset Disposal Relief (BADR) applies, the rate is 18% for disposals on or after 6 April 2026, against a £1 million lifetime limit, after the £3,000 annual exempt amount. EMI shares qualify for BADR without meeting the usual 5% personal company test, provided the disposal is at least two years after the option was granted and the holder was an employee or officer throughout that period.

Can founders be given EMI options?

Usually not. Anyone with a material interest in the company, meaning more than 30% of the ordinary share capital, is not an eligible employee, which rules out most founders at seed stage. Founders normally hold ordinary shares from incorporation, which they already own outright. A founder whose holding has been diluted to 30% or less and who still works at least 25 hours a week, or 75% of their working time, for the company can be granted EMI options.

What happens if an employee goes part-time after being granted EMI options?

Dropping below 25 hours a week, or below 75% of their total working time for the company, is a disqualifying event. The employee then has 90 days to exercise with the tax treatment preserved. If they exercise later, the growth in value from the date of the disqualifying event is taxed as employment income. A change in hours is easy to miss and may only come to light at a sale years later, when the 90 days have long passed, so check working time against the test whenever someone's hours change.

Do we still have to file anything if we granted no options this year?

Yes. Every live EMI scheme requires an annual Employment Related Securities return by 6 July following the end of the tax year, including a nil return for a year in which nothing was granted, exercised or lapsed. Late returns attract an automatic £100 penalty, rising with further delay. The return is separate from the grant notification, and the duty to file it continues every year from registration until the scheme is formally closed on the Employment Related Securities service.