The Enterprise Management Incentive (EMI) scheme provides a tax-efficient way for qualifying start-ups up to medium-sized businesses to reward and retain key employees. This article explores the key requirements and considerations for businesses looking to implement an EMI scheme effectively.
Attracting and retaining talent can be critical to a business’s growth trajectory. By granting share options that can be exercised in the future once certain conditions are met, EMI schemes foster a culture of ownership and long-term commitment to the business.
These schemes are frequently applied in early-stage technology start-ups but are also relevant to a broad range of SME businesses across Scotland.
Benefits for employers and employees
EMI options allow employees to acquire shares in their company without incurring income tax or National Insurance (NI) contributions at the point of grant or exercise, provided the scheme meets HMRC requirements. Employers also benefit from reduced NI liabilities, making EMI a mutually advantageous arrangement.
These schemes are particularly suited to small, high-growth trading companies, defined as those with:
- Gross assets of £30 million or less
- Fewer than 250 full-time employees
To qualify, employees must:
- Work at least 25 hours per week for the company
- Not hold a material interest in the business (typically more than 30% of shares)
Key limits and conditions
EMI schemes are subject to specific limits and conditions that govern how much can be granted and the rules both companies and employees must follow:
- Companies can grant up to £3 million worth of EMI options at any one time
- Individual employees may receive up to £250,000 in share options over a three-year period
- Options may be satisfied by newly issued shares or existing shares, but must be:
- Ordinary shares
- Fully paid up
- Free from restrictions that would disqualify them under EMI rules
Implementing an EMI scheme
Effectively using EMI options can significantly enhance a company’s ability to attract and retain talent while aligning employee interests with business growth. Important considerations when designing an EMI scheme include:
- Tailoring options for different staff levels (be they senior managers or scientists, with parameters that motivate each skillset)
- Choosing between exit only options (valuable only upon a share sale, trade sale, or IPO) or options vesting over time (allowing ownership to occur earlier than an exit)
- Ensuring articles of association are well suited to an option scheme and align with company objectives
- Establishing clear performance criteria
- Defining the conditions under which options lapse is also a key consideration
A well-structured EMI scheme not only rewards employee commitment but also aligns their interests with the company’s long-term goals.
Our Corporate and Technology team regularly advise clients on the design and legal implementation of EMI schemes, working closely with accountants and tax advisers. Even for businesses where EMI may not be suitable, there are alternative options that can achieve similar objectives.
If you’d like to explore the potential benefits for your business, please contact a member of the Corporate team.
Published 8 October 2025
