The Autumn Budget 2025 delivered the most significant reform to the Enterprise Management Incentive (EMI) regime in over a decade. While EMI has long been regarded as the gold standard for employee equity incentives in the UK, its usefulness has been constrained by limits that many successful growth companies quickly outgrew. The latest changes materially widen access, creating a genuine opportunity for a new cohort of businesses to revisit EMI as a core part of their people and growth strategy.

Key changes to EMI and why this matters

From April 2026, the Government will substantially increase the company-level thresholds that determine whether EMI can be used. The employee headcount limit will double to 500 and the gross assets threshold will quadruple to £120m. The overall limit on unexercised EMI options will double to £6m, and the maximum option life will extend to 15 years.

These changes are more than technical. They acknowledge that today’s growth businesses often take longer to reach liquidity and scale more quickly in terms of people and balance sheet than was envisaged when EMI was first introduced. In policy terms, this is a welcome statement of intent: EMI is no longer just for start-ups, but for scale-ups that are becoming substantial employers in their sectors.

Note that certain companies registered in Northern Ireland will remain subject to the current limits.

A renewed opportunity for growing companies

For many businesses, these reforms will be transformative. Companies that were previously excluded from EMI because they became ‘too successful’ may now find themselves within the expanded thresholds. That creates several practical opportunities:

• Reintroducing EMI as the primary equity incentive for senior and high-impact employees
• Providing additional scope for grants to retain a wider group of key talent during the critical scale-up phase
• Designing longer-term incentives that reflect extended time horizons to exit or IPO.

In what remains a competitive labour market for top talent, where cash rewards alone are often insufficient, the ability to offer genuine equity participation on favourable tax terms can be a decisive differentiator.

Time to revisit CSOP and other alternative strategies?

Many companies that outgrew EMI migrated to Company Share Option Plans (CSOPs) as the next best alternative. While CSOPs have their place, they are generally less flexible and may deliver less attractive outcomes for participants than EMI.

Given the expanded eligibility, businesses that adopted CSOPs (or other alternative structures such as non-tax-advantaged options or directly acquired growth shares) by necessity rather than preference should now take stock. For new grants from April 2026 onwards, EMI may once again offer superior alignment between employees and shareholders, alongside a more compelling tax profile. For some groups, this will mean running EMI and other structures side by side. For others, it may prompt a more fundamental rethink of their incentive architecture.

Where the EMI reforms still fall short

Despite the positive headline news, the reforms stop short of extending EMI to most companies backed by private equity (PE). The longstanding rule that EMI shares must not be in a company controlled by another company remains untouched. In practice, this continues to exclude the majority of PE-backed structures, where ownership typically involves a controlling corporate vehicle above the top company.

This will come as a disappointment to many management teams operating in PE-backed environments, particularly where EMI would otherwise be an ideal tool for incentivising growth and value creation.

While there were sound policy reasons for the original restrictions, the vastly increased importance of PE ownership in the UK economy of 2026 means that excluding employees in PE-owned groups appears difficult to reconcile with the stated objectives of EMI. In practice, the inability to operate EMI within most PE‑backed structures has often been a factor in limiting the extension of equity participation to a relatively small group of senior executives holding sweet equity. A measured extension of EMI to certain mid‑market PE‑owned businesses could support broader employee participation in equity and help reinforce the long‑term growth of this important segment of the UK economy.

Steps businesses should consider now

With implementation still some months away, businesses have a valuable window in which to:

• Review current and projected headcount and asset levels against the new EMI thresholds
• Assess whether existing CSOP or unapproved arrangements remain appropriate once EMI becomes available
• Consider whether existing EMI options should have their exercise periods extended.

The future of EMI and employee equity incentives in the UK

The Autumn Budget 2025 reforms reposition EMI as a central pillar of the UK’s growth company ecosystem. For businesses that were previously excluded simply because they scaled faster or grew bigger, this is a timely and strategically important opportunity. While the continued exclusion of most PE-backed companies feels like unfinished business, the broader direction of travel is clear: employee equity remains firmly on the Government’s agenda as a driver of long-term growth.

For more information please get in touch with Martin Cooper or your usual RSM Share Plans & Reward contact.