What is an enterprise management incentive scheme?
Answered 11 March 2026
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Enterprise Management Incentives (EMI)
What the law says
An Enterprise Management Incentive (EMI) scheme is a statutory framework under Chapter 9, Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), which provides:
- for share options notified to HMRC to be qualifying options for the purposes of the EMI code; and
- for exemptions and reliefs from income tax in connection with those qualifying options.
A "qualifying option" is defined as a share option (i.e. a right to acquire shares in a company) in relation to which the requirements of Schedule 5 to ITEPA 2003 are met at the time the option is granted, and which is notified to HMRC in accordance with Part 7 of that Schedule.
The provisions of Chapter 9 and Schedule 5 together constitute "the EMI code".
A key qualifying condition is that the company must have fewer than 250 full-time equivalent employees (or, for a parent company, the combined total across it and its qualifying subsidiaries must be less than 250).
The individual limit on the value of unexercised EMI options held by an employee was increased to £250,000 by the Income Tax (Limits for Enterprise Management Incentives) Order 2012.
For options granted on or after 6 April 2024, notification to HMRC must be made on or before 6 July following the end of the tax year in which the option was granted (previously 92 days from grant).
HMRC guidance / practice
EMI was introduced by FA 2000 and, unlike other tax-advantaged share schemes, does not have an approval process. It is specifically intended to help small higher-risk companies to recruit and retain skilled employees.
Under EMI, certain small trading companies can grant share options to eligible employees who will normally pay no Income Tax or National Insurance contributions either when the EMI options are granted, or — if exercised within 10 years of grant — when they are exercised.
There is both:
- a limit on the value of shares over which unexercised EMI options may be held by an individual employee; and
- an overall limit for the company.
EMI is classified as a tax-advantaged scheme, meaning that employees and directors who receive share options under its provisions may not be liable to certain Income Tax charges under employment income that would otherwise arise. The CGT position of the employer and employees may also differ from that in unapproved schemes.
Shares acquired under an EMI option are not within the scope of PAYE and NICs when Income Tax charges arise on the exercise of options, provided the shares are actually acquired in accordance with the scheme.
An EMI option is formally defined by HMRC as an "option over shares in an EMI company which qualifies for tax advantages."
Citation sources
The table in ERSM170500 sets out the main situations in which PAYE and NICs apply. The most important exception is that shares acquired under a tax advantaged share or option scheme, or an Enterprise Management Incentive (EMI) option, are not within the scope of PAYE and NICs when, as often happens, Income Tax charges arise on the exercise of options. It is important to remember however that the exception only applies where the shares are actually acquired in accordance with the tax advantaged s
Part 7 Employment income: income and exemptions relating to securities Chapter 9 Enterprise management incentives Introduction Enterprise management incentives: qualifying options 527 1 This Chapter provides— a for share options notified to an officer of Revenue and Customs to be qualifying options for the purposes of the EMI code, and b for exemptions and reliefs from income tax in connection with qualifying options. 2 Schedule 5 contains the requirements that have to be met for a share option
The concept of tax advantaged share schemes originated in FA 1978 with the introduction of approved profit sharing schemes (APSS, since abolished). In FA 1980 the Savings Related Share Option Scheme was introduced. Sometimes known as Sharesave (or SAYE), it is an all-employee share option scheme that links regular savings with share options. Discretionary share option schemes were introduced by FA 1984. They are now referred to in the legislation as CSOP schemes (previously known as company shar
Certain employee share schemes may be approved by HMRC under specific statutory provisions. At the time of writing there are three types of approved share schemes and also the Enterprise Management Incentives. With all four, employees and directors who receive shares or share options under their provisions may not be liable to certain of the Income Tax charges under employment income that would otherwise arise. They are sometimes referred to as tax advantaged schemes. The Capital Gains Tax posit
Part 1 Income tax and corporation tax Chapter 1 Reliefs for businesses etc Other reliefs Enterprise management incentives: time limits 13 1 Part 7 of Schedule 5 to ITEPA 2003 (enterprise management incentives: notification of options) is amended as follows. 2 In paragraph 44(1) (time within which notice of options must be given to HMRC) for “within 92 days after the date of the grant of the option” substitute “on or before 6 July following the end of the tax year in which the option was granted”
Under the Enterprise Management Incentives (EMI) certain small trading companies are able to grant share options to an eligible employee or employees who will normally have to pay no Income Tax or National Insurance contributions either when the EMI options are granted or, if exercised within 10 years of grant, when they are exercised. There is a limit on the value of shares over which unexercised EMI options may be held by an individual employee and an overall limit for the company. The statuto
Citation and commencement 1 This Order may be cited as the Income Tax (Limits for Enterprise Management Incentives) Order 2012 and comes into force on 16 June 2012. Increase in the limits for enterprise management incentives 2 1 The EMI code in the Income Tax (Earnings and Pensions) Act 2003 is amended as follows. 2 In— a paragraph 5(1)(a) of Schedule 5, b paragraph 6(1) and (3) of that Schedule, c section 536(1)(e), for “£120,000” substitute “£250,000”. James Duddridge Jeremy Wright Two of the