EMI options explained: limits, vesting and what changed after the 2025/2026 Budget

EMI is only available to genuinely smaller companies — there are limits on the size of the company itself, on how many options can be outstanding across the whole workforce, and on how much any one employee can hold. Those qualifying limits widened from 6 April 2026: the employee headcount cap rose from 250 to 500 full-time equivalents, the gross assets limit from £30 million to £120 million, and the total unexercised options a company can have outstanding from £3 million to £6 million. The £250,000 cap on how much any one employee can hold in unexercised options hasn’t changed.

You’re granted an option — the right to buy a set number of shares at a fixed price (the exercise price), usually set at the shares’ market value on the day of grant. Nothing is owed and no tax is due at grant. The option then typically vests over time, and you exercise it — actually buying the shares — later, most commonly triggered by an exit (an acquisition or listing) rather than on a fixed date.

Three dates worth knowing:

• Grant date — when the option is awarded, and the exercise price is fixed.
• Vesting — when you earn the right to exercise, often in stages over several years.
• Exercise — when you actually buy the shares, which starts the clock on qualifying for the lower Business Asset Disposal Relief (BADR) rate on a later sale.

Provided the option was granted at market value and exercised within the option’s life, there’s typically no Income Tax or National Insurance at exercise — the gain is taxed as a capital gain when you eventually sell the shares, not as income when you exercise. That’s the core reason EMI is worth so much more, in practice, than an unapproved option granting the same number of shares.

Hold the shares for at least two years from grant and you may also qualify for Business Asset Disposal Relief on sale, taxing the gain at a reduced rate rather than the standard Capital Gains Tax rate — though that reduced rate itself has been rising: 10% before 6 April 2025, 14% from 6 April 2025, and 18% from 6 April 2026.

• The exercise price, and whether it was set at market value at grant.
• The vesting schedule, and what happens to unvested options if you leave.
• Whether exercise is only possible on an exit event, or can happen sooner.
• The option’s expiry date — EMI options are commonly granted with a 10-year life. From 6 April 2026 the maximum rises to 15 years for newly granted options, and — unusually — some existing options can also be formally amended to extend their exercise period the same way, though not every older option will qualify. Worth checking with whoever administers the scheme rather than assuming.