How EMI schemes can help your business keep key employees

‘The Great Resignation’, an influx of employees leaving their jobs in unprecedented numbers over the last few years.

Since the pandemic, many people have re-evaluated their priorities, seeking better work-life balance, more meaningful roles, flexible working and growth opportunities. This trend shows no sign of slowing and reflects a broader shift in generational expectations in the workplace.

This wave has affected businesses of all sizes, but smaller companies, particularly those in more specialist fields, can feel a much larger impact. Finding and keeping the right people has become one of the biggest challenges for SMEs. Losing talented employees can disrupt growth, affect consistency across the business, and create gaps that are difficult to fill.

 

What’s the solution?

Nothing ever is a guarantee, but there are some tried and tested ways to give your team a stronger reason to stay and remain motivated.

One of the most effective tools is an EMI (Enterprise Management Incentive) scheme. This is a government-approved share option scheme, which allows businesses to grant selected employees the right to buy shares in the company at a future date at a discount (or even todays price).

By giving employees a stake in the business, it gives them more incentive for contributing to the growth in the company and hopefully staying in the long run. This incentive isn’t something that would particularly be easy to give up. If the shares increase in value, employees can reap significant gains upon selling them.

 

Can’t I just grant normal share options? Why is it tax efficient?

You can grant normal (unapproved) share options, but EMI options are specifically designed to make employee ownership more tax efficient for both the business and the employee – so why wouldn’t you choose EMI if you could?

Under a non-approved scheme:

• On exercising their options, the employee has to pay income tax and NICS at rates of up to 45%*.
• On sale, CGT at up to 24%* would be due based on the Market Value, less any amounts subject to income tax.
• A CT deduction can usually be made for the company, based on the amount on which the employee is subject to income tax.

 

Under an EMI scheme:

• On exercising their options, if done within 10 years of the grant, with no disqualifying event, and no discount at grant, there will be no income tax or NICS on exercise.
• CGT is payable on the sale of the shares, but only up to 24%* (with the potential to claim a lower rate of 14%** Business Asset Disposal Relief, with less strict conditions under EMI).
• A CT deduction can usually be made for the company, based on the difference between the market value when the shares were acquired and the amount the employee paid for them.

*based on current rates as of October 2025

**subject to increase to 18% from 6^th April 2026

 

How does my business set this up?

Before granting EMI share options, a business first needs to confirm it meets the eligibility criteria. The company must be an independent trading entity with gross assets of £30 million or less and fewer than 250 full-time equivalent employees. There are also conditions relating to the employees themselves, so it is important to involve a suitably qualified tax adviser to ensure compliance before moving forward.

While there is no formal HMRC approval process for EMI schemes, it is possible to agree the share valuation in advance. This is an area where experienced advisers can add real value, helping to reduce risk and ensure the scheme is structured effectively.

Companies are required to notify HMRC within 92 days of granting options, and there is also an annual reporting requirement to maintain compliance.

You would need to consult a solicitor to assist in drafting the relevant legal documentation, such as the option agreements, to ensure the scheme is legally robust.

 

Will it fit the needs of my business?

One of the biggest advantages of an EMI scheme is its flexibility. The structure can be tailored to the business’s goals and workforce, allowing it to be a powerful retention and motivation tool. For example:

• The number of options or timing of exercise can be linked to individual or corporate performance targets.
• Exercise may be tied to specific events or milestones, ensuring alignment with the company’s growth objectives.

In short, an EMI scheme can be designed to fit the unique needs of each business, providing a tax-efficient way to reward and retain the employees who are most critical to its success.

 

Next Steps

If you’re looking for ways to retain key employees and reward their contribution to your business, an EMI scheme could be the solution. If you want to find out more, please get in touch.