Entity Setup
Entity Setup: Unlocking Boosted Reliefs for Startups with EMI, EIS & VCT Changes
The UK’s recently expanded tax reliefs for high-growth businesses—including wider eligibility and increased investment caps—give founders, employees, and investors powerful tools—if they act smartly.
By NomadicTax Research Team • 5-8 min read • June 18, 2026
## What Has Just Been Announced
Effective from **6 April 2026**, the UK introduced a package of changes to help startups, scaleups and investors: the **Enterprise Management Incentives (EMI)**, **Enterprise Investment Scheme (EIS)**, and **Venture Capital Trusts (VCTs)** reliefs have all been expanded.([gov.uk](https://www.gov.uk/government/news/britains-innovators-backed-with-around-100m-of-new-investment?utm_source=openai))
### Key changes include:
- **EMI scheme**: gross assets test increased from **£30 million to £120 million**; employee cap doubled from **250 to 500**; company-share option limit doubled 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 limits**: lifetime company investment cap doubled to **£24 million**, with annual limits raised to **£10 million**. Gross assets test raised to **£30 million** (pre-share issue) and **£35 million** (post-issue).([gov.uk](https://www.gov.uk/government/news/britains-innovators-backed-with-around-100m-of-new-investment?utm_source=openai))
- **Income tax relief for VCT investors** reduced from **30% to 20%**, rebalancing reliefs between VCTs and EIS.([gov.uk](https://www.gov.uk/government/news/britains-innovators-backed-with-around-100m-of-new-investment?utm_source=openai))
## What This Means for Founders & Investors
| For Founders / Employees | Implications |
|--------------------------|---------------|
| More startups can offer EMI-style options | Employee incentives can now be used in larger companies with more employees and bigger balance sheets. |
| Competitive recruitment tool | More companies can use this to attract and retain talent via share options. |
| For Investors | Implications |
|--------------------------|---------------|
| Higher risk allocation permitted for early‐stage investments via EIS/VCT | Larger funds and bigger companies can now qualify, potentially increasing returns. |
| Lower upfront income tax relief on VCT investments | Relief dropped from 30% to 20%, so investors must factor reduced benefit into decisions. |
## Actionable Strategies
1. **Review your company structure**: If you’re a startup approaching previous asset/employment thresholds, reassess your speed of scaling to take advantage.
2. **Plan EMI grants**: Now, more employees may qualify; structure options to fit within new higher caps.
3. **Align fund-raising timing**: If you’d planned to use VCTs or EIS, timing post-6 April 2026 gives higher limits; ensure compliance now.
4. **Recalculate return projections**: Lower VCT income tax relief impacts net returns—budget accordingly.
5. **Work with advisers**: They must be registered under MMTAR once those phases apply to them; make sure your legal/accounting team is compliant.
## Example Case
> A biotech startup, “BioScale Ltd,” had 40 employees and assets of £25 million at the end of 2025; previously ineligible for EMI (limit was £30 million). Under the new rules, BioScale now can qualify, offering share-options to employees—helping retain scientists. If it raises £1 million via VCT investment, investors now get 20% income tax relief instead of 30%, but overall incentives remain strong because of bigger scale EIS and VCT limits.
In sum, **starting businesses and investors** have a more favourable set of levers than before—but must be alert to timing, paperwork, and trade-offs (like lower relief rates).