Enterprise Management Incentives: key changes announced in the 2025 Budget

Enterprise Management Incentives (EMI) are tax-advantaged employee share option schemes designed to help companies attract, incentivise and retain key talent.

Historically, EMI options have only been available to smaller, start-up businesses. However, following the Chancellor’s Budget announcement on 26 November 2025, the scope of EMI will be significantly widened, bringing larger and scaling companies within the regime for the first time.

What’s changing?

Under the previous legislation, companies were required to satisfy strict size and value thresholds before granting EMI options. The Budget reforms expand these thresholds as follows:

• Employee headcount: the company must have fewer than 500 full-time employees at the time of grant (increased from 250)
• Gross assets: the company’s gross assets must not exceed £120m at the time of grant (increased from £30m)
• Value of unexercised options: a company may have up to £6m of unexercised EMI options outstanding at any time (increased from £3m)
• Exercise window: EMI options must be exercised within 15 years of grant (extended from 10 years).

Together, these amendments represent the most significant expansion of EMI eligibility to date.

When will the changes take effect?

The new thresholds will apply to all EMI options granted on or after 6 April 2026.

Importantly, the extended 15-year exercise period will also apply retrospectively. This means companies may amend existing EMI options to extend the exercise window from 10 to 15 years without compromising the scheme’s tax-advantaged status.

What does this mean for businesses?

These reforms materially broaden the availability of EMI and create new opportunities for companies at later stages of growth:

• Expanded eligibility for scale-ups: businesses that have grown beyond the previous limits – particularly those with larger headcounts or significant assets – may now adopt EMI for the first time. Companies that implemented EMI early in their lifecycle can also continue to use the scheme as they scale, ensuring consistency in their reward strategy
• Greater flexibility around exit events: the longer exercise period provides both employers and employees with additional time to realise value through an exit or liquidity event. This reduces the risk of losing EMI tax treatment where timelines shift or planned exits take longer than anticipated
• Enhanced recruitment and retention: by widening the scope of EMI, the government has strengthened one of the most valuable tools available to high-growth companies seeking to attract, retain and motivate key personnel. The extended thresholds also increase the pool of employees who can participate, supporting long-term engagement throughout the growth journey.

How we can help

Our Corporate team works with professional advisers to design and implement EMI schemes for your business. We draft essential legal documentation such as the option scheme rules, setting out the overarching structure and governance of the EMI scheme, and the EMI option agreements, outlining the terms and conditions of the share options granted to each employee.

We advise a variety of clients to reward and retain existing employees while ensuring the scheme is strategically aligned with their business objectives.