A valuation decides how much of the company an investor gets for their money. We model the cap table and agree EMI valuations with HMRC.
In the British Business Bank's illustrative example, £1m for 20% post-money values the company at £5m post-money and £4m pre-money, and the founders go from 100% to 80%.
Pre-money valuation is the value of the company before the investment. Post-money valuation is the value including the amount invested.
When the company issues new shares to an investor, the existing shareholders' percentage falls. The number of shares they hold does not change. This fall in percentage is called dilution (British Business Bank, what is a term sheet).
This example is the British Business Bank's, and is illustrative. The founders hold 1,000,000 shares. An investor puts in £1m for 20% of the company after the investment.
| Before the round | After the round | |
|---|---|---|
| Founders' shares | 1,000,000 (100%) | 1,000,000 (80%) |
| Investor's shares | none | 250,000 (20%) |
| Total shares | 1,000,000 | 1,250,000 |
| Valuation | £4m pre-money | £5m post-money |
The arithmetic: £1m buys 20% of the post-money value, so the post-money value is £1m ÷ 20% = £5m. Taking off the £1m invested leaves a pre-money value of £4m. The investor needs 20% of the enlarged company, so 250,000 new shares are issued, and 250,000 ÷ 1,250,000 = 20%. The price per share is £1m ÷ 250,000 = £4, the same as £4m ÷ 1,000,000.
An option pool is a block of shares set aside for future share options for staff. Investors often ask for the pool to be created before they invest. Done that way, the pool dilutes the founders and not the investor, so the founders' percentage after the round is lower than the headline valuation suggests.
When you compare offers, work out each one on the same basis: the founders' percentage after the round, with the option pool included.
Before granting EMI options, a company can ask HMRC Shares and Assets Valuation to agree the value of its shares, using form VAL231. An agreed EMI valuation is valid for 90 days, so grant the options inside that window (HMRC share scheme valuations).
The EMI limits rose on 6 April 2026 (HMRC policy paper):
| Before 6 April 2026 | From 6 April 2026 | |
|---|---|---|
| Company options | £3m | £6m |
| Gross assets | £30m | £120m |
| Employees | fewer than 250 | fewer than 500 |
| Exercise period | up to 10 years | up to 15 years |
| Options per employee | £250,000 | £250,000 |
Our EMI share options service is £2,950 + VAT, including the valuation agreed with HMRC, then £295 + VAT a year.
Pre-money is what the company is worth before the investment. Post-money is that value plus the amount invested.
No. Your shareholding stays the same and your percentage falls, because new shares are issued to the investor.
Investors often ask for the option pool to be created before they invest, so that it dilutes the founders and not the investor.
You can ask HMRC Shares and Assets Valuation to agree the value before you grant the options, using form VAL231. An agreed EMI valuation is valid for 90 days (HMRC share scheme valuations).
From 6 April 2026 a company can have £6m of EMI options, gross assets of up to £120m and fewer than 500 employees, and options can be exercised for up to 15 years. The limit per employee is £250,000. Northern Ireland specified companies keep the old limits.
