Entity Setup
Entity Setup Case Study: UK Investor Schemes After EMI Expansion in 2026
The UK’s EMI, EIS and VCT schemes have expanded. Here’s how start-ups can structure equity and shares to attract talent and investment.
By NomadicTax Research Team • 5-8 min read • June 21, 2026
## 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](https://www.gov.uk/government/news/britains-innovators-backed-with-around-100m-of-new-investment?utm_source=openai)) 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](https://www.gov.uk/government/news/britains-innovators-backed-with-around-100m-of-new-investment?utm_source=openai))
- **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](https://www.gov.uk/government/news/britains-innovators-backed-with-around-100m-of-new-investment?utm_source=openai))
## 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](https://www.gov.uk/government/news/britains-innovators-backed-with-around-100m-of-new-investment?utm_source=openai))
## 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
1. Review current equity compensation plan: does employee count or asset base fall inside new EM I/EIS thresholds?
2. Reprice or restructure share options or equity to maximize tax benefits for both founders/employees.
3. Consult HMRC-approved valuation methods—for EMI options to ensure favorable tax treatment.
4. Communicate clearly with potential investors: EIS/VCT incentives now more generous numerically, though VCT relief dropped; clarify in investor materials.
5. 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.