Entity Setup
Entity Structuring Insights: Expanding EMI, EIS, & VCT for Scale-Ups
From 6 April 2026, UK law expands eligibility and limits for EMI, Enterprise Investment Scheme (EIS), and Venture Capital Trusts (VCT), creating powerful tools for start-ups and scale-ups to attract investment and talent.
By NomadicTax Research Team • 5-8 min read • May 14, 2026
## Overview of Schemes & What's Changing
The UK’s EMI, EIS, and VCT schemes are tax-advantaged routes to support businesses and investors. Under recent reforms:
- **EMI (Enterprise Management Incentives)** limits will **double** or more: company option cap from £3 million to £6 million; gross asset threshold from £30 million to £120 million; employee number from 250 to 500; holding/exercise period extended from 10 to 15 years. ([gov.uk](https://www.gov.uk/government/publications/enterprise-management-incentive-scheme-increasing-the-limits/expanding-the-eligibility-limits-of-the-enterprise-management-incentive-scheme?utm_source=openai))
- **EIS and VCT** changes include doubling investment limits and gross asset thresholds. Also, **VCT upfront income tax relief** drops from **30% to 20%** to balance incentives. ([gov.uk](https://www.gov.uk/government/news/britains-innovators-backed-with-around-100m-of-new-investment?utm_source=openai))
- These changes are effective from **6 April 2026**. EMI exercise period extension also applies to existing contracts that haven’t lapsed or been exercised. ([gov.uk](https://www.gov.uk/government/publications/enterprise-management-incentive-scheme-increasing-the-limits/expanding-the-eligibility-limits-of-the-enterprise-management-incentive-scheme?utm_source=openai))
## Strategic Benefits for Scale-Ups & Investors
- **Employee attraction & retention**: wider eligibility under EMI enables more companies to reward staff with tax‐efficient share options, aligning employee success with company growth.
- **Investor incentives**: EIS/VCT limits increased mean more capital can flow into early-stage firms, potentially improving late seed or Series A funding.
- **Tax relief balancing**: Though VCT relief reduced, the higher limits may offset impact for some investors.
## Practical Steps for Entities & Founders
1. **Review corporate structure**: Ensure your company meets the expanded thresholds (gross assets, number of employees) to qualify.
2. **Plan for share option design**: If you're issuing options, update exercise periods; consider amending existing EMI contracts to extend them to 15 years if beneficial.
3. **Investor communication**: If raising via EIS/VCT, transparently communicate changes in relief and thresholds—they could affect investor decisions.
4. **Tax advice**: Engage specialists early to manage legal drafting, share valuation, and filings (e.g. EMI notifications and end-of-year ERS returns).
5. **Monitor timing**: Ensure grants or investments fall on or after 6 April 2026 to benefit from new thresholds.
## Illustrative Example
> Startup “GreenAI Ltd” in biotech has 350 employees and £25m in assets by March 2026. Previously not eligible for EMI (employee cap 250), they couldn’t offer share options to late-hire talent. After reforms, from 6 April 2026, they can issue up to £6m in share option value, include more employees, and allow options to be exercised over 15 years. Also, an investor using VCT can invest more into GreenAI, though relief drops from 30% to 20%, the investment cap increase makes it still attractive.
## Risks & Considerations
- **Specified company restrictions**: Companies in Northern Ireland trading in goods or electricity are classified as “specified companies” and do not benefit from extended exercise periods even if other thresholds pass. ([gov.uk](https://www.gov.uk/government/publications/enterprise-management-incentive-scheme-increasing-the-limits/expanding-the-eligibility-limits-of-the-enterprise-management-incentive-scheme?utm_source=openai))
- **Administrative burden**: Higher limits mean more complex valuation, legal documentation, and reporting (EMI notifications by 6 July, ERS returns, etc.).
- **Tax relief uncertainty for investors**: VCT relief falls—affects net return; investors may prefer EIS under certain risk/return profiles.
## Action Items for Entities & Investors
- Audit your growth plans and whether thresholds will be exceeded or met.
- Update or consult your share-scheme documentation; amend existing EMI contracts where possible.
- Ensure grant dates and filings align with legislative windows.
- Educate employees on tax implications of share options (Income Tax, CGT).
- For investors, model returns under new relief percentages and limits to ensure net benefits.
These reforms make UK entity structure and investment strategy more flexible—smart planning can unlock major upside.