Entity Setup
Entity Setup Lessons: How Expanded EMI, EIS & VCT Limits Reshape Startup Funding in the UK
Starting April 2026, new thresholds for enterprise incentives like EMI, EIS and VCT are increasing significantly — what that means for founders, investors and structuring your company.
By NomadicTax Research Team • 5 min read • February 27, 2026
## What Are EMI, EIS & VCT? A Quick Refresher
- **EMI (Enterprise Management Incentives)**: Share option scheme allowing companies to grant options with favorable tax treatment to employees.
- **EIS (Enterprise Investment Scheme)** and **VCTs (Venture Capital Trusts)**: Encourage private investment by offering upfront tax relief, CGT-free gains, loss relief, etc.
## What’s Changing from April 2026?
From **April 2026**, new more generous limits will apply: EMI eligibility thresholds, company size, and investment caps will increase—these changes are part of a UK government call for evidence to expand support for scaling businesses. ([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))
Key changes proposed include:
- Gross assets test for companies under EMI rising from **£30 million** to **£120 million**.
- Employee limit under EMI doubles from **250 to 500**.
- Company share option limit under EMI doubles from **£3 million to £6 million**.
- For EIS & VCT, lifetime company investment limits increasing to **£24 million** (£40 million for knowledge intensive companies), annual company investment limits to **£10 million** (£20 million for KICs). Gross assets tests also increase. ([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 Founders & Investors
- Enables **larger startups** to use EMI without restructuring—for example tech firms scaling rapidly can offer share options more widely.
- **Investors** in scaling companies get more opportunity to use EIS or VCT schemes.
- Raises potential funding per company; attracts more international capital and skilled employees.
## Examples: Real-World Impacts
- A software scale-up with **£80 million** in assets will become EMI-eligible under the new gross assets test.
- Investors pumping in **£12 million** in a knowledge-intensive company may now get full EIS relief, where previously limits were binding.
## Structuring Tips for Startups Setting Up Now
1. Review your current cap table, valuation, asset base—project where you will be by April 2026.
2. If approaching limits, consider filing EMI options or fundraising rounds before new rules take effect.
3. For knowledge-intensive companies (KICs), ensure certification to access enhanced thresholds.
4. Liaise with legal and financial experts to ensure compliance with EIS/VCT criteria under new limits.
## Risks and Considerations
- Regulations proposed in the “call for evidence” stage—not yet enacted legislation. Final details may differ.
- Monitoring certification and definitions—what constitutes “knowledge intensive” could affect access.
- High asset companies must be attentive to dilution and other tax-planning trade-offs.
## Actionable Advice Now
- If you are founding or investing in a startup, **model capital needs** under both old and proposed thresholds.
- Ensure employee share schemes are compliant and options are issued within these new limits.
- Prepare documentation ahead of April 2026 to avoid delays.
- Keep updated via HMRC and Treasury publications—join stakeholder calls and consult the official “Tax Support for Entrepreneurs: Call for Evidence” document. ([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))
**Closing Thoughts**: These expanded thresholds present a rare opportunity to scale equity-based incentives. Proper timing and structure will allow founders and investors to reap the most benefit under the new regime.