EMI share options

Also called Enterprise Management Incentive, Share options, Option pool

A tax-advantaged way to give employees a stake in the future without giving them shares today.

What it means

A share option is the right to buy shares at a fixed price at a future date. EMI is the UK's tax-advantaged scheme for smaller companies: no income tax on grant or, usually, on exercise, with growth taxed as a capital gain.

Options normally vest over time and are exercisable on an exit or after a period.

Why it matters

It lets a company that cannot pay large salaries share the upside, and it aligns people with the outcome rather than with the payroll.

It also keeps the cap table simple in the meantime — option holders are not shareholders until they exercise.

What it looks like in practice

Qualifying conditions apply to the company (size, trade, independence) and the employee (working time, shareholding limits).

Agree the market value with HMRC before granting where possible, and notify each grant to HMRC within the statutory deadline — missing it can lose the tax advantages entirely.

Set the option pool size deliberately. Investors will expect one, typically a meaningful percentage, and it dilutes existing shareholders.

What to watch out for

Promising options and never granting them. An email saying "you'll get 2%" creates expectation and no rights, and resolves badly either way.

Leavers. What happens to vested and unvested options on leaving must be in the scheme rules, decided before anyone leaves.

Where to get proper advice

A solicitor and a tax adviser who do EMI schemes routinely. The scheme is standardised enough that this is not usually expensive.