Why the extended holding period matters
Historically, EMI options had to be exercised within ten years of grant to retain their tax-advantaged status. For many scaling businesses, this time frame was increasingly out of step with modern growth cycles, where companies remain private for longer and exit events are often delayed. The new 15-year period gives both companies and employees greater flexibility and more time to benefit from the scheme.Crucially, this extension is not limited to new options. Existing EMI options that have not expired or been exercised can also benefit, provided the scheme rules and option agreements are amended accordingly by written agreement between the grantor and option holder. HMRC has confirmed that such amendments will not be treated as a surrender and regrant, so the valuable tax advantages of EMI are preserved. Companies with options nearing their tent anniversary should review their plans now to ensure they can take advantage of this opportunity.
Broader access and simplified compliance
While the extension of the holding period is a key change, the Government has also introduced several other important reforms to the EMI regime to broaden eligibility.
From April 2026, the thresholds for what constitutes a “qualifying company” will be substantially increased:
- the company option limit will double from £3 million to £6 million;
- the gross assets threshold will quadruple from £30 million to £120 million; and
- the employee headcount limit will double from 250 to 500.
These changes will bring larger companies within the scope of EMI for the first time.
Additionally, for greater administrative simplicity, from April 2027, the requirement to notify HMRC of EMI grants will be abolished. Instead, companies will simply include EMI grants in their annual Employment Related Securities ("ERS") return. This reduces the risk of losing tax advantages due to missed notifications and streamlines compliance, though annual ERS reporting remains essential.
EMI changes to holding period and thresholds
The extension of the EMI option holding period to 15 years is a long-awaited and highly practical reform, giving companies and employees more time to realise value. The accompanying increases in qualifying thresholds and the simplification of compliance requirements further enhance the attractiveness of EMI as a tool for talent retention and incentivisation.
For companies or investors in a company that has granted EMI share options which have not been exercised there is now an opportunity to provide employees and option holders with an additional benefit by agreeing to extend the maximum period of holding of the EMI options from ten to fifteen years.
If you had previously considered EMI share options as a form of incentive for your workforce but discounted it due to not meeting one of the qualifying conditions, we would encourage you to reconsider setting up an EMI option scheme.
Practical steps for companies
Based upon the changes to EMI introduced by the Budget 2025, we recommend that companies:
- Review and amend existing EMI plans to extend the exercise period where appropriate.
- Assess eligibility under the new, higher thresholds and consider implementing or reinstating EMI schemes if your company will now qualify.
- Prepare for compliance changes by updating internal processes ahead of the removal of the notification requirement in 2027.
- Seek specialist advice to ensure amendments are made correctly and all compliance obligations are met.
Northern Irish companies
Please be aware that the above amendments to the EMI legislation do not apply to companies with a registered office in Northern Ireland that carry on a trade involving:
- a trade in goods, or
- the generation, transmission, distribution, supply, wholesale trade or cross-border exchange of electricity.
This article was authored by James Cashman, Rory Clarke and Emma McMeekin.
If you would like tailored advice or assistance in establishing or amending an EMI scheme, our Tax and Share Schemes team is available to help.
