EMI Share Options Explained

A tax-advantaged share option scheme for employees of small and medium companies. No Income Tax when you exercise the options, and potentially just 10% CGT when you sell.

What is EMI Share Options?

Enterprise Management Incentives (EMI) are share options that qualifying companies can grant to employees. They are designed to help small companies attract and retain talent by offering equity participation with generous tax treatment. Each employee can hold up to £250,000 worth of EMI options, and the company can grant up to £3 million in total.

How it works

The company grants you options at an agreed exercise price (which can be the current market value or a discount). When you exercise the options (buy the shares), there is no Income Tax or NI to pay, provided the exercise price was at or above the market value at the time of grant. When you sell the shares, you pay Capital Gains Tax on the profit. If you have held the options for at least 2 years and the company meets the criteria, you may qualify for Business Asset Disposal Relief, reducing the CGT rate to 10%.

Real example

Laura is granted EMI options over 10,000 shares at £1 each. Two years later, the company is sold for £5 per share. Laura exercises her options (paying £10,000) and immediately sells for £50,000. Her gain is £40,000. With BADR, she pays 10% CGT on £37,000 (after the £3,000 exemption): £3,700. Without EMI/BADR, she would pay Income Tax and NI on the difference, potentially £16,000 or more.

Who does this affect?

Employees of qualifying companies with gross assets under £30 million and fewer than 250 full-time equivalent employees. The company must be a trading company (not primarily involved in investment, property or finance). Company directors qualify if they work at least 25 hours per week or 75% of their working time for the company.

HMRC source

gov.uk/tax-employee-share-schemes/enterprise-management-incentives-emis