Enterprise Management Incentive (EMI)

An Enterprise Management Incentive (EMI) is the most generous of HMRC's tax-advantaged share schemes, designed for trading companies with gross assets of £30 million or less and fewer than 250 full-time-equivalent employees. The company can grant share options worth up to £250,000 (market value at grant) to any one employee, capped at a total of £3 million across the workforce.

Provided the option price is at least equal to the share's market value at grant, no income tax or NI is due on grant or exercise. On sale, only Capital Gains Tax applies, and shares acquired through EMI can qualify for Business Asset Disposal Relief (BADR) — a 14% CGT rate from 6 April 2025 (rising to match the main 18%/24% rates over the 2026/27 medium term in line with current legislation) — provided the option has been held for at least two years.

Worked example: Aisha is granted EMI options over 10,000 shares at a market value of £2 each. Five years later, the company is sold and her shares are worth £20. She exercises and sells, realising a £180,000 gain. Because she has held the option for more than two years, BADR applies, taxing the gain at 14% rather than the standard 24% higher CGT rate, saving roughly £18,000. EMI is so attractive that most start-up share-incentive packages default to it; the option grant itself does not appear on the payslip, but any cash bonus paid alongside, or any shortfall between option price and market value at grant on a 'discounted' EMI, is taxed through PAYE.