Key Scheme Changes for Growth Companies
The UK government has expanded investment-incentive options as part of its entrepreneurship relief package effective 6 April 2026. Key changes include:
- Expanded Enterprise Management Incentives (EMI): gross assets test quadrupled (from £30 million to £120 million), employee and share option caps doubled (from 250 to 500 employees; £3 million to £6 million share-option limit). (gov.uk)
- Enterprise Investment Scheme (EIS) & Venture Capital Trusts (VCT): lifetime company investment limits doubled to £24 million; annual limits increased to £10 million per company. Income Tax relief rates for VCT investment reduced from 30% to 20% to better balance risk-reward. (gov.uk)
Why These Matter When Setting Up an Entity
These reforms offer strategic advantages for companies and founders when establishing or scaling up entities within the UK:
- Talent Attraction & Retention: generous stock options via EMI incentivise employees. If your entity meets the new thresholds, large startups can offer tax-advantaged equity.
- Capital Raising: larger EIS / VCT limits mean entities can attract more investment in early growth stages without losing UK tax reliefs.
- Relief Trade-offs: VCT relief falling from 30% to 20% means investors may rebalance portfolio expectations—entities must demonstrate higher potential returns to justify investor risk.
Real-World Example
Imagine a biotech startup plans to recruit globally and raise rounds of funding using EIS/VCT:
- Under old EMI, company exceeded £30 million asset threshold and couldn’t offer EMI options—but now with £120 million limit, it can.
- Attracting a senior hire becomes easier when you offer EMI options worth up to £250,000 per employee.
- Allowing more external investment under EIS/VCT: you can raise up to £10 million annually while still qualifying for investor reliefs.
Practical Steps to Set Up Entities Optimally
- Corporate Structure: ensure share classes and articles support investor-friendly terms; understand what counts as “gross assets” and “dividends/loans” for relief eligibility.
- Valuation & Timing: plan your growth so that when you cross new thresholds, you don’t lose past-eligibility. If assets are near threshold, consider timing of capital expenditure or share-issues.
- Investors’ Perspective: with lower VCT relief rates, provide compelling financials; consider combining EIS and VCT reliefs.
- Compliance Matters: keep accurate records of qualifying assets, ensure you meet the “knowledge-intensive” criteria if applicable. Seek EMI/EIS advanced assurance from HMRC early.
Setting up your company to align with EMI, EIS, and VCT criteria is now more accessible for scale-ups. Being proactive can make the difference in securing funding and rewarding employees in a tax-efficient manner.