Limited company guide
How to give employees equity through an EMI scheme, eligibility, valuation, the 92-day notification, exercise, leavers and the tax outcome.
Written and reviewed by Waqas Sagar Member of ICAEW, Fellow of ACCA, Fellow of AAT, a double graduate and entrepreneur at heart, helping startups grow and serving thousands of businesses nationwide with an excellent team. Published by LimitedCompany.Accountants, 12 London Road, Morden, London SM4 5BQ. Reviewed 12 September 2026 against 2026/27 UK rates and current Companies House and HMRC guidance.
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QuickBooks PartnerCertified ProAdvisor100+ yearsCombined team experienceFully insuredUp to £2m indemnityEMI is the most tax-efficient way for a qualifying UK company to give employees equity. Granted at market value, there is normally no income tax or National Insurance on grant or exercise, and gains on eventual sale fall under capital gains tax.
Why EMI
Eligibility
Valuation and notification
Designing the scheme
EMI is the most tax-efficient way for a qualifying UK company to give employees equity. Granted at market value, there is normally no income tax or National Insurance on grant or exercise, and gains on eventual sale fall under capital gains tax.
Compare that with unapproved options, where exercise typically triggers an income tax charge and, for readily convertible assets, employer and employee National Insurance through payroll. The difference to an employee can be dramatic.
The company must have gross assets under £30m, fewer than 250 full-time-equivalent employees, a permanent UK establishment and a qualifying trade. Employees must work at least 25 hours a week or 75% of their working time, and must not hold more than 30% of the company.
There are limits: £250,000 of unexercised options per employee and £3m across the scheme.
Agree a market valuation with HMRC before granting. The agreed value fixes the exercise price for tax purposes and is normally valid for a defined period.
Notify each grant to HMRC within 92 days. Late notification loses the tax advantages for that grant, a purely administrative failure with a very real cost. Grants and exercises also feed the annual employment-related securities return due by 6 July.
Decide vesting, cliff, exercise conditions and what happens on leaving before you promise anything. 'Good leaver' and 'bad leaver' definitions cause most disputes, and they cannot be fixed retrospectively.
Most UK startups use exit-only exercise, so options only become shares on a sale. It keeps the cap table clean and avoids employees paying to exercise into an illiquid holding.
Local help
We work with company directors across London and Surrey from our office at 12 London Road, Morden, London SM4 5BQ. Pick your area, or send the form below and we will call you back.
Frequently asked
Not under EMI, it requires employment and a working time commitment. Advisers usually receive unapproved options or growth shares, which are taxed differently.
It depends on the scheme rules and the buyer. Options may be exercised at exit, rolled over into buyer options, or lapse. Exit provisions should be drafted at the outset.
Options themselves do not usually breach the schemes, but share issues on exercise and any resulting rights changes should be checked against the qualifying conditions.
Typically four to eight weeks including the HMRC valuation, so start before you need to make offers.
Keep bank statements, sales and platform reports, purchase invoices, payroll records, VAT workings, finance agreements and Companies House correspondence. We confirm the exact list at onboarding and identify gaps before a filing deadline becomes urgent.
The fee depends on transaction volume, record quality, VAT and payroll requirements, historic catch-up and the level of reporting needed. We agree a fixed scope and price before technical work starts, with published packages available on our fees page.
Yes. We request professional clearance, collect the prior records and authorities, check the next Companies House and HMRC deadlines, and give you one clear handover list. The process is normally completed remotely.
Yes. We work through secure cloud records, scheduled reviews and digital approvals, while keeping a named team available by phone, video call and email. Clients can also visit our Morden office by appointment.
We regularly work with Xero, QuickBooks, FreeAgent, Sage and connected sales or expense apps. The right setup depends on transaction volume, integrations and the reports you need, not simply the software brand.
The relevant calendar may include annual accounts, Corporation Tax payment and return dates, confirmation statements, VAT returns, payroll submissions and Self Assessment. We map the dates from your company year end and registrations.
Included approach
Check the current rules
Deadlines, thresholds and filing rules change. GOV.UK and Companies House publish the current statutory position; advice should then be applied to your company’s circumstances.
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