Entity Setup
Entity Setup for Start-Ups: EIS, VCT & EMI Changes from April 2026
From April 2026 UK law will expand start-up reliefs—changes to EIS, VCT and EMI eligibility offer opportunity but also risks for inbound founders.
By NomadicTax Research Team • 5-8 min read • March 16, 2026
## What are EIS, VCT and EMI?
- **EIS (Enterprise Investment Scheme)** and **VCT (Venture Capital Trusts)** are investor-focused reliefs providing Income Tax or Capital Gains incentives to invest in early-stage companies.
- **EMI (Enterprise Management Incentives)** allows qualifying companies to grant share options to employees with preferential CGT treatment.
## What is changing from April 2026
Budget 2025 delivers reforms to make these schemes more generous and flexible: ([gov.uk](https://www.gov.uk/government/calls-for-evidence/tax-support-for-entrepreneurs-call-for-evidence/tax-support-for-entrepreneurs-call-for-evidence?utm_source=openai))
| Relief | Key Change | Effective date |
|--|--|--|
| **EMI** | Gross assets test increased from £30m to **£120m**; employee cap doubled from 250 to **500**; share option limit up from £3m to **£6m**; max holding period extended to **15 years**. Applies to both existing and new contracts. | From **April 2026** ([gov.uk](https://www.gov.uk/government/calls-for-evidence/tax-support-for-entrepreneurs-call-for-evidence/tax-support-for-entrepreneurs-call-for-evidence?utm_source=openai))
| **EIS & VCT** | Lifetime company investment limits doubled; annual company investment limits doubled; gross asset tests increased to higher bands; except VCT upfront relief reduces from 30% to **20%** to better align with EIS. | From **6 April 2026** ([gov.uk](https://www.gov.uk/government/calls-for-evidence/tax-support-for-entrepreneurs-call-for-evidence/tax-support-for-entrepreneurs-call-for-evidence?utm_source=openai))
## Why these changes matter for entity setup
- **Scale-ups benefit**: Companies now able to raise more capital via VCT/EIS thanks to higher investment limits.
- **Longer retention for employees** under EMI makes options more attractive and retention tools more powerful.
- **For investors**, reduced VCT relief rate changes risk/reward; EIS remains more favourable for pure equity and startup exposure.
## Practical steps for start-ups and founders
1. **Review incorporation timing**: If you anticipate raising via EIS/VCT, ensure incorporation and qualification in place before 6 April 2026.
2. **Adjust seniority and ownership structures**: To comply with EMI gross assets and employee numbers caps.
3. **Forecast fundraise caps**: With doubled limits, plan rounds accordingly.
4. **Communication with investors**: Clarify relief rates, especially the reduced VCT relief, so investors evaluate properly.
5. **Maintain qualifying status over time**: Keep accounting records, ensure active trade rules, restrictions on substantial holdings etc.
## Example case
A biotech start-up in Oxford currently has 200 employees, assets of £25m. Under old rules, it qualified for EMI options, but only limited VCT/EIS investment. With changes, it can now accept up to **£10 million per year** via EIS/VCT (for non-KIC), and potentially contract EMIs up to £6m of options. The founder can pre-emptively issue EMI options to key staff before asset valuations creep too high.
## Key risks to look out for
- **Dilution**: Larger investment limits may lead to more fund rounds, diluting earlier shareholders.
- **Reduced reliefs for VCT**: The downward adjustment to VCT upfront relief reduces tax incentive—this could affect investor interest.
- **Qualification compliance**: Mis-structuring could lead to loss of reliefs and unexpected tax bills.
## Checklist before April 2026
- Confirm whether your company meets conditions for “knowledge-intensive company” if applicable.
- Update or draft option agreements (EMI) in line with new thresholds.
- Engage with legal/tax advisors to ensure share issuances and capital raisings qualify.
- Communicate with existing investors about upcoming changes so you can align expectations.
These changes offer big opportunity for growth companies—set up your entity correctly now to make the most of the reformed reliefs.