EMI options calculator, 2026/27

How this is calculated

EMI options are the most tax-efficient way to give UK employees a stake in company growth. Provided the option is granted at an exercise price agreed in advance with HMRC and the scheme meets the qualifying conditions, no income tax or National Insurance arises when the option is granted or exercised, only capital gains tax on eventual sale.

The capital gain is the difference between the sale proceeds and the amount actually paid to exercise the option (the exercise price), less the annual exempt amount of £3,000 for 2026/27. EMI shares held for at least the qualifying period can access Business Asset Disposal Relief at 18.0%, up to the £1,000,000 lifetime limit, without needing the normal 5% shareholding and voting rights test that applies to other BADR claims.

If the qualifying period or other BADR conditions are not met, the gain is taxed at the standard capital gains tax rates instead, currently up to 24% for higher and additional rate taxpayers.

Why EMI is attractive for growing companies

Companies with gross assets under £30 million and fewer than 250 employees can grant EMI options up to a per-employee limit of £250,000 and a company-wide limit of £3,000,000 of unexercised options, making it well suited to ambitious SMEs wanting to retain key staff without paying higher cash salaries.

Because there is no tax on grant and none on exercise (if priced correctly), employees only face a tax bill when they actually sell shares and receive cash, which avoids the common problem of a 'dry' tax charge on illiquid shares.

Practical pitfalls

Getting the valuation agreed with HMRC wrong, or missing the notification deadline after grant, can disqualify the whole scheme and convert it into an unapproved option taxed as employment income instead, which is a materially worse outcome.

Company disqualifying events, such as a change of control or the company ceasing to meet the trading requirement, can also affect the tax treatment, so EMI schemes need ongoing monitoring, not just a one-off setup.

What happens if my company is sold before I exercise my options?

Most EMI schemes include exercise-on-exit provisions so options are exercised immediately before completion of a sale, often on a cashless basis, so you receive net sale proceeds rather than needing to fund the exercise price separately.

Do I pay income tax if I exercise below market value?

Yes. If the exercise price is set below the market value agreed with HMRC at grant, the discount is taxed as employment income (and can attract NIC) at exercise, which is why accurate valuations matter.

Is there a limit on how many EMI options a company can grant?

Yes, the total unexercised EMI options across all employees cannot exceed £3,000,000 of value at grant, and no individual employee can hold more than £250,000 of unexercised EMI options at any time.

Does leaving the company affect my EMI options?

Usually yes; most option agreements provide for unvested or unexercised options to lapse on leaving, sometimes with 'good leaver' provisions allowing a shorter exercise window, so the specific plan rules need checking.