UK Legal Alert: Relaxing the Rules for EMI Options

Significant and meaningful changes are coming in 2026 to the UK Enterprise Management Incentive (“EMI”) share option regime. The Chancellor of the Exchequer, announced that some of the limitations applying to EMI options will be relaxed in April 2026 by making five bold changes. If your company has already implemented an EMI option plan, these changes could transform your approach to employee equity.

Before we get into it – here is a quick recap:

Understanding EMI: The UK’s Tax-Favoured Share Option Plan

EMI is a tax-advantaged share option plan designed to help fast-growing UK companies attract and retain talent by offering employees a tax-advantaged stake in the business. Companies can grant options to key employees (within certain size and asset thresholds) and employees benefit from favourable tax treatment when those options are exercised.

If a company does not qualify for EMI, it might fall back on a non-tax advantaged option plan (more flexible, but far less tax efficient) or a Company Share Option Plan (“CSOP”) - a cousin of EMI, but with stricter rules.

The changes announced in this budget supercharge the EMI regime - making it available to more companies, more employees and for longer durations.

Let’s break down what is changing and why the spotlight is on EMI right now.

(i) Time After Time (You Asked, They Listened)

The current EMI rule: EMI options must be exercised within 10 years or they lose their tax-advantaged status.

The new EMI rule: The limit on the exercise period of EMI options has been extended from 10 years to 15 years.

Why it matters: This is music to the ears of companies with exit-only mechanics or long-runway growth. No more gymnastics around early exercise rights are needed to stay compliant. Now companies have time while still preserving and tax efficiency.

Action step: Update your plan rules now to build in the extended 15 year term.

(ii) The Devil Wears EMI: Size Is Back in Style

The current EMI rule: Companies must have fewer than 250 full-time equivalent employees at the date of grant.

The new EMI rule: The qualifying company employee limit has doubled from 250 to 500 full-time equivalent employees.

Why it matters: If companies have been skirting close to the 250 threshold - or had to pivot to a CSOP - this change may allow them to pivot  back to the EMI regime. This means more companies can keep using EMI options to attract and retain top talent - even as their headcount surges.

Action step: Map your current headcount across group entities and reassess if CSOP grants can now be made under EMI instead which will result in tax savings.

(iii) Mo’ Money, Mo’ Eligibility

The current EMI rule: A company’s gross assets must not exceed £30 million at the date of grant.

The new EMI rule: The gross assets cap has been quadrupled from £30 million to £120 million.

Why it matters: This quadruple jump means EMI is no longer just for startups. More mature companies, especially those in capital-heavy sectors like life sciences or tech, can now qualify - and unlock all the tax efficiency that comes with it.

Action step: Recheck your group’s consolidated position. If you previously turned away from EMI before, it may be time to reopen that door.

(iv) No Notification, No Cry (from 2027) (Yes, we’re serious — goodbye notification rule)

The current EMI rule: Companies must notify HMRC of EMI grants by 6 July in the tax year following grant to secure tax-advantaged treatment.

The new EMI rule: From April 2027 the notification requirement will be retired.

Why it matters: Late notifications are a common due diligence pain point - this change removes a major risk, but companies will need to stay compliant until then.

Action step: Until this change becomes effective, review your notification process and keep all calendar reminders firmly in place.

(v) PISCES: The Plot Twist EMI Didn’t Know It Needed

The current EMI rule: EMI options can only be exercised on events defined in the plan - usually on an exit, IPO or within a fixed time period.

The new EMI rule: The Government has introduced legislation allowing a Private Intermittent Securities and Capital Exchange System (“PISCES”) event to be included as an exercise trigger for EMI options and CSOPs in existing and new grant documentation.

Why it matters: Building a PISCES event into your plan rules increases liquidity, helps establish a share value track record within a regulated market environment and acts as a stepping stone to a broader corporate exit event.

Action step: Consider whether to amend your plan rules to allow exercise on a PISCES event when such change becomes law.

Should I Stay or Should I CSOP?

(Short answer: probably not.)

If you have issued options under a CSOP in the past due to EMI ineligibility - this is the moment to re-evaluate. EMI options are more flexible, more efficient and now more available than ever.

Next Steps

We recommend a quick diagnostic on your current EMI plan so you are ready to grant options when the changes take effect in April 2026:

• Do your documents reflect the new 15-year term?
• Are you tracking employee and asset limits group-wide?
• Could CSOP grants be migrated back to EMI?
• Do your board and finance team understand the new flexibility?

Whether you are planning a funding round, restructuring your cap table, prepping for an exit or just want to clean up your plan documents, Saba Rais and Anna Humphrey, our UK Executive Compensation partners are here to support you.

 

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.