Unlocking Growth Potential: The Power of Enterprise Management Incentive (EMI) Schemes

In today’s competitive business landscape, attracting and retaining top talent is crucial for companies, particularly in the fast-paced world of tech and high-growth industries. One powerful tool that has gained popularity among businesses looking to incentivize their key employees and drive growth is the Enterprise Management Incentive (EMI) scheme. In this article, we will explore how EMI schemes work and why companies, especially those in the tech and high-growth sectors, should consider utilising them.

Understanding EMI Schemes

EMI schemes are a tax-efficient and flexible way for companies to reward and retain their most valuable employees by granting them the opportunity to acquire shares in the business. These schemes were introduced by the UK government to encourage companies to offer equity incentives to their employees, aligning their interests with those of the business and fostering a sense of ownership and commitment.

Here’s a brief overview of how EMI schemes typically work:

Eligibility: To be eligible for an EMI scheme, a company must meet certain criteria. It must be an independent trading company (or the parent of a group of trading companies), have gross assets of less than £30 million, and employ fewer than 250 full-time employees. Tech and high-growth companies often fit these criteria perfectly.

Granting Options: The company issues share options to selected employees, allowing them to purchase shares in the future at a pre-determined price, known as the exercise price. These options can be subject to various performance and time-based conditions.

Tax Advantages: One of the key advantages of EMI schemes is their tax efficiency. Employees who exercise their options typically benefit from a reduced tax liability compared to other equity incentive schemes, thanks to favourable capital gains tax (CGT) treatment.

Alignment of Interests: EMI schemes align the interests of employees with those of the company, as employees only realize the full value of their shares if the business grows and prospers. This encourages long-term commitment and motivation.

Why Utilise EMI Schemes?

Now that we’ve covered the basics of EMI schemes, let’s explore why tech and high-growth businesses should consider implementing them:

Attracting and Retaining Top Talent: In competitive industries like tech, attracting and retaining the best talent is paramount. EMI schemes offer a compelling incentive for key employees to join and stay with your company, as they have the potential to benefit directly from the company’s success.

Motivation and Alignment: EMI schemes foster a strong sense of ownership and alignment with the company’s goals. Employees become more motivated to work towards the company’s success, as it directly impacts the value of their share options.

Tax Efficiency: EMI schemes provide a tax-efficient way to reward employees. The tax benefits for both employees and the company can make EMI options a cost-effective choice compared to alternative incentive schemes.

Exit Strategy: EMI schemes can play a crucial role in exit strategies such as mergers and acquisitions (M&A). They can help ensure key employees remain committed during a transition, ultimately preserving the company’s value.

Growth and Innovation: Tech and high-growth companies thrive on innovation and agility. EMI schemes can serve as a powerful tool to attract innovators and creative thinkers who can drive the business forward.

Competitive Advantage: Implementing EMI schemes can give your company a competitive edge when recruiting top talent. It sends a clear message that you are committed to rewarding and valuing your employees.

A Real-World Example

The directors in a growing software company decide to grant options of 5% of the company’s shares to two key employees each, which have an agreed value with HMRC of £5,000. Exercising the options will only be allowed upon sale of the company.

3 years later the company is sold for £10m, which means that the two key employees exercise their options at a cost to them of £5,000 and receive £500,000 each.

This is taxed as a capital gain of £495,000 and after the annual exemption is liable to 10% tax amounting to £48,390 tax each.

If the share options were not granted under the EMI scheme the whole £495,000 would be subject to Income Tax and possibly National Insurance contributions, which could lead to a tax bill of up to £222,750.


Enterprise Management Incentive (EMI) schemes are a valuable tool for tech and high-growth companies looking to attract, retain, and motivate top talent while maintaining tax efficiency. These schemes align the interests of employees with the company’s growth objectives, fostering a culture of ownership and commitment.

As a director overseeing tech and high-growth businesses, it’s essential to explore the potential benefits of EMI schemes for your company. By leveraging this powerful incentive mechanism, you can enhance your ability to attract and retain the talent that will drive your company’s success in the dynamic and competitive tech landscape.

Author: Jake Standing, Director, Plus Accounting

Any views or opinions represented in this blog are personal, belong solely to the blog owner and do not represent those of Plus Accounting. All content provided in this blog is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site.

Date published: 11 March 2024

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