Equity is one of the strongest tools UK employers have to attract, retain, and motivate key staff — particularly at the scale-up stage where cash is tight but talent is critical. The four HMRC tax-advantaged schemes — EMI, CSOP, SAYE and SIP — each offer different combinations of flexibility, eligibility and tax efficiency.
EMI (Enterprise Management Incentive) is the most tax-efficient share scheme for SME employees — no income tax or NIC on grant or exercise (up to £250,000 of options per employee), and gains taxed at 14% Business Asset Disposal Relief rate on sale (rising to 18% in April 2026). Companies must have under £30m gross assets and fewer than 250 employees.
From 6 April 2026, the most popular scheme — Enterprise Management Incentives (EMI) — has been substantially expanded, opening it up to many more scale-up companies. This guide explains how each scheme works and which is right for your business.
🆕 EMI Expansion at a Glance — April 2026
- Company-wide unexercised options: £3m → £6m
- Gross assets threshold: £30m → £120m
- Maximum employees: 250 → 500 FTE
- Maximum exercise period: 10 → 15 years (applies retrospectively to existing options)
Why Use a Share Scheme?
Equity-based reward aligns the financial interests of staff with those of the company and its shareholders. For owner-managed and scale-up businesses, it can:
- Help close the pay gap with larger competitors without burning cash
- Tie key talent in through vesting and exercise periods
- Convert what would otherwise be income (taxed at up to 47% plus NI) into capital gains taxed at 18%/24% — or 18% under Business Asset Disposal Relief
- Build a culture where staff genuinely care about the outcome
The Four UK Tax-Advantaged Schemes at a Glance
| Scheme | Best For | Key Feature |
|---|---|---|
| EMI | SMEs and scale-ups (up to 500 employees, £120m gross assets from April 2026) | Most generous; highly flexible; selected employees only |
| CSOP | Larger companies or those that fail EMI tests | £60,000 individual cap; selected employees only |
| SAYE | Listed and large unlisted companies | Open to all employees; savings-linked options; 20% discount |
| SIP | Companies wanting genuine all-employee ownership | Trust-held shares; four award types; strongest for large employers |
EMI — The Big April 2026 Expansion
EMI is the most generous tax-advantaged option scheme available in the UK. From 6 April 2026, the qualifying limits have been substantially expanded:
| EMI Limit | Pre-6 April 2026 | From 6 April 2026 |
|---|---|---|
| Company-wide unexercised options | £3 million | £6 million ↑ |
| Maximum gross assets | £30 million | £120 million ↑ |
| Maximum employees | 250 FTE | 500 FTE ↑ |
| Maximum option exercise period | 10 years | 15 years ↑ (retrospective) |
| Individual option limit (per employee) | £250,000 | £250,000 (unchanged) |
📋 Retrospective 15-Year Extension
The 15-year exercise period also applies retrospectively to existing EMI options that have not yet expired or been exercised, provided they are amended in line with the legislation. If you have employees holding EMI options that were approaching the 10-year limit, review them now.
📅 April 2027: Notification Rules Change
From 6 April 2027, the requirement to notify HMRC of each EMI grant within 92 days will be removed. Annual end-of-year ERS returns will replace per-grant notifications, significantly reducing compliance burden for companies making multiple grants.
EMI Tax Treatment
Provided EMI options are granted with an exercise price equal to (or higher than) the market value of the shares at grant, and all qualifying conditions are met:
- No income tax or NI on grant
- No income tax or NI on exercise (at market value)
- Full gain taxed as a capital gain — and may qualify for Business Asset Disposal Relief at 18% (increased from 14% from April 2026)
⚠️ Two Ongoing Conditions to Track
- Working time requirement: the option holder must work at least 25 hours per week or 75% of their working time for the EMI company throughout the life of the option. A period of absence (illness, parental leave, reduced hours) can jeopardise the EMI status of existing options — keep track.
- Qualifying trade test: the company must continue to carry on a qualifying trade. A change in business activity can disqualify outstanding options and trigger unexpected income tax charges on the employees holding them.
Set Up an EMI Scheme
End-to-end EMI design, valuation and HMRC submission — fixed fee from £1,500.
CSOP — When You Don't Qualify for EMI
The Company Share Option Plan (CSOP) suits companies that have outgrown EMI or operate in excluded sectors. Each employee can hold up to £60,000 of unexercised options.
Tax treatment mirrors EMI: no income tax on grant, no income tax on exercise after three years, and capital gains treatment on sale. Unlike EMI, there is no minimum working time requirement — making CSOP more suitable for part-time or portfolio executives.
SAYE — All-Employee Savings-Linked Options
SAYE is a savings contract running for 3 or 5 years, at the end of which employees can use their accumulated savings to buy shares at a discount of up to 20% on the price set at grant. Must be offered to all employees on similar terms.
- No income tax or NI on the discount or on exercise
- CGT applies on sale (with annual exempt amount of £3,000)
- If the share price falls below the option price, employees can take their savings back in cash — no downside
SAYE is best suited to listed companies and large unlisted employers with a broad workforce. It requires HMRC registration and a qualifying savings body (usually a bank or building society).
SIP — Tax-Efficient All-Employee Ownership
Share Incentive Plans hold shares in a trust for at least five years to deliver full tax relief. Four types of award:
🏠 Four SIP Award Types
- Free Shares: up to £3,600 per employee per year — no cost to the employee, income tax and NI free if held five years
- Partnership Shares: employees buy shares from pre-tax salary up to £1,800 per year (or 10% of salary if lower) — immediate income tax and NI saving
- Matching Shares: employer awards up to 2 matching shares for each Partnership Share bought — powerful retention tool
- Dividend Shares: cash dividends reinvested in shares; free of income tax if held three years
Non-Tax-Advantaged Options and Growth Shares
If none of the HMRC schemes fits — for example, the company is too large for EMI, the recipient is a non-employee adviser, or the equity needs are unusual — alternatives include unapproved share options and growth shares. Both can be powerful, but tax treatment is less generous and structuring requires care to avoid unintended income tax charges on employees.
Growth shares in particular can be highly effective — a separate class of shares that only participate in value above a hurdle, allowing founders to give employees a share of future upside without giving away value that already exists. Getting the valuation and structure right is critical.
✅ Key Takeaways — Share Schemes in 2026/27
- EMI is now significantly more accessible from 6 April 2026 — companies with up to £120m gross assets and 500 employees now qualify. Reassess if you previously failed the tests.
- Existing EMI plans can be amended to extend exercise periods to 15 years without losing tax advantages — review options approaching the old 10-year limit
- Get a market value valuation agreed with HMRC (Form EMI1 / VAL231) before grant — strike prices set below market value forfeit much of the income tax advantage
- Scheme rules and shareholder agreements must mesh carefully — drag-along, leaver provisions and good/bad leaver rules all affect option treatment
- Annual ERS returns are due by 6 July following the tax year end — late returns trigger automatic penalties even where there is nothing to report
- From April 2027, the 92-day per-grant EMI notification requirement is removed — replaced by annual returns only
Frequently Asked Questions
What changed with EMI from April 2026?
From 6 April 2026, EMI limits were substantially expanded: company-wide unexercised options doubled to £6 million, gross assets threshold quadrupled to £120 million, maximum employees doubled to 500 FTE, and the maximum option exercise period extended from 10 to 15 years (including retrospectively for existing options).
What is the tax treatment of EMI options?
EMI options granted at market value attract no income tax or NI on grant or exercise. The full gain is taxed as a capital gain and may qualify for Business Asset Disposal Relief. The BADR rate increased to 18% from April 2026.
Which employee share scheme is right for my company?
EMI is the most generous option for SMEs and scale-ups with up to 500 employees and £120m gross assets from April 2026. CSOP suits companies that have outgrown EMI. SAYE and SIP are better for all-employee schemes in larger or listed companies.
Shamim helps UK companies design, implement and run EMI, CSOP, SAYE, SIP and bespoke equity arrangements. He holds the CTA — the UK's highest tax qualification — and has extensive experience structuring equity incentives for scale-up and owner-managed businesses.
Are you a growth-stage tech or software business?
This article connects to our Technology & Software specialism — tax-led advisory for growth-stage SaaS, AI/ML, IT services and platform businesses. R&D claims defensibly prepared, EMI scheme design, US-UK structuring. Led by a Chartered Tax Adviser with senior in-house corporate tax experience.