Context
On 6 April 2026, the UK implemented significant expansions to the Enterprise Management Incentives (EMI) scheme, Enterprise Investment Scheme (EIS), and Venture Capital Trusts (VCT), as part of a package designed to unlock investment in high-growth companies. (gov.uk) These changes bring larger companies and more employees into eligibility.
Key Changes Under the 2026 Expansion
- EMI scheme: gross assets test quadrupled (from £30 million to £120 million). Employee limit and share-option limit doubled (from 250 to 500 employees; share limit from £3 million to £6 million). (gov.uk)
- EIS / VCT changes: lifetime company investment limits doubled to £24 million; annual limits increased to £10 million; asset tests relaxed. Simultaneously, income tax relief for VCT investments reduced from 30% to 20%, rebalancing the incentive structure. (gov.uk)
How Start-Ups Should Respond: Structuring Equity and Fundraising
Determine What’s Best for Your Stage
- Early-stage high growth: EMI now more accessible if you’re scaling fast, with more employees and bigger asset base;
- If seeking broad investor base and public trust, EIS/VCT can unlock more funding, though upfront relief on VCTs is now lower.
Allocating Options to Employees
- Because the employee cap doubles, you can offer EMI share options to more people—including non-executives or international hires—without breaching thresholds.
- Share valuation and exercise price matters: must be defensible; using independent valuation minimizes HMRC challenge.
Fundraising Strategy Tips
- Use EIS/VCT-qualified shares to attract investors seeking relief. Even with VCT relief now lower, many investors value diversification and less administrative complexity.
- Time financing rounds before April 5 injury dates if possible to capture old limits? But new rules apply effective 6 April 2026. (gov.uk)
Real-World Example
A tech start-up founded in 2024 has gross assets of £80 million, 400 employees. Before 2026, it couldn’t use EMI (asset cap was £30 million). After the changes, it becomes eligible for EMI. If it grants options worth £1 million across employees, those could now benefit from EMI treatment rather than higher-tax allocations.
Action Plan for Entrepreneurs
- Review current equity compensation plan: does employee count or asset base fall inside new EM I/EIS thresholds?
- Reprice or restructure share options or equity to maximize tax benefits for both founders/employees.
- Consult HMRC-approved valuation methods—for EMI options to ensure favorable tax treatment.
- Communicate clearly with potential investors: EIS/VCT incentives now more generous numerically, though VCT relief dropped; clarify in investor materials.
- Monitor compliance timelines: The 2026-27 tax year contains new thresholds; ensure accounting and HR structures reflect changes from day one.
Takeaway: The EMI/EIS/VCT upgrades in the UK unlock new possibilities for start-ups to attract talent, reward employees, and raise capital more efficiently. Understanding the precise limits and structuring entity equity appropriately is critical.