However, as the market continues to develop at pace, especially in AI and deeptech, the limits and complexity of the current EMI rules are showing their age. With valuations climbing faster and companies taking longer to reach an exit, we are seeing more and more cases where EMI does not quite stretch far enough to support either employee attraction and retention or nurture UK companies to sufficiently scale.

Here’s how we think EMI could be improved to keep supporting UK startups in preparation for the UK budget.

Why EMI still matters, and where it falls short today

The intention behind EMI remains spot on. It is a scheme that supports growth-stage businesses in giving employees a genuine stake in the company while offering tax-efficient upside. Many founders see EMI options as central to hiring and retaining staff, particularly when cash compensation may lag behind larger, international rivals.

Recent data from Startup Coalition shows just how vital share options are for startups. Most employers rated them as essential, with 82% saying they help attract top talent and 85% citing their importance for retention. The stakes are clear: 85% believe motivation would drop if benefits changed, and 58% think staff would leave if options became less attractive. EMI makes a real difference; 92% said EMI options motivate employees, and 82% said they help attract talent that would otherwise be out of reach.

Yet the current framework is increasingly mismatched with the reality of high-growth tech businesses in 2025. Take the individual limit: employees may not be granted more than £250,000 worth of EMI options measured at the time of award. While this worked for early-stage companies a decade ago, it quickly gets restrictive in sectors like AI and deeptech, where valuations can surge rapidly. 

As salaries and expectations rise, UK firms find themselves at a disadvantage against US competitors who can offer substantially larger equity packages.

The £250,000 cap on EMI share options does not stretch far for fast-growing businesses, especially in AI where we are currently seeing valuations soar. Once the cap is hit, and to retain talent, businesses either have to offer top-up grants outside the scheme, which lose valuable tax benefits and cost more due to employer national insurance or switch to alternative tax-efficient incentive mechanisms like growth shares.

This undermines the very objective of EMI: to help British tech businesses meaningfully compete for the best talent.

Company limits: when growth becomes a hurdle

Another issue is triggered as soon as a business raises a major funding round. The EMI scheme imposes a gross assets limit of £30 million at the date of grant. 

Many successful tech businesses are now hitting these thresholds just when they most need to hire, grant options, and accelerate. For rapidly scaling companies, the timing of a funding round or a valuation step-up can force the closure of EMI grants, making strategic planning difficult, introducing friction in the hiring process. 

The Company Share Option Plan can be used as a successor to EMI when the £30 million limit is blown, but the £60,000 individual grant limit doesn’t go very far, particularly when companies are competing against global tech giants with deep pockets. Structures to deliver more tax-efficient upside to employees, like growth shares are relatively complex to implement and communicate compared to EMI.

The ten-year exercise window and the reality of modern exits

Today, exits are often taking much longer than they did a decade ago and exits strategies are evolving. IPOs particularly in the UK are no longer the chosen exit for many businesses.  

It’s also critical that government policy doesn’t encourage UK companies to exit too early but rather supports UK companies to scale in the UK to become world-beating companies.

Many of the UK’s most successful businesses now remain private for 10 to 12 years or even longer. However, EMI options must be capable of exercise within a ten-year period. This arbitrary limitation puts pressure on both company and option holder, especially when liquidity events take longer to achieve. Longer-lasting incentives, and flexibility around secondary transactions, are increasingly needed to keep employees motivated right up to the point of exit.

Allowing employees who are approaching the 10-year limit to exchange their options for new options at the original exercise price whilst preserving the EMI tax benefits would be helpful. This recognises the contribution these employees have made to the business and might be an alternative to an outright extension to the 10-year period.

Practical changes: what would a modern EMI look like?

• Increase the individual cap and align its operation with vesting periods: raising the per-person limit from £250,000 to £400,000 to adjust for inflation since the limit was increased in 2012 would go some way to allowing founders to offer packages that are more competitive, particularly in sectors with rapid wage and valuation growth. Indexing the cap to inflation or wage trends would future-proof its relevance. Amending the operation of the financial cap so that it refreshes every four years in line with a typical four-year vesting period would align the tax rules more closely with how companies use share options
• Update company eligibility thresholds: the £30 million asset test can halt EMI eligibility at precisely the point when businesses need it most. Increasing the limit would allow companies to keep issuing EMI as they scale. It’s worth noting that the French equivalent of the EMI, the BSPCE has a €150 million market cap limit
• Extend the ten-year exercise period: providing a longer window, perhaps 15 years, would reflect the current reality of longer growth cycles. Allowing continuing employees whose options will lapse at the 10-year date to exchange their options at the original strike price to preserve their tax-efficient upside should also be considered
• Review the £3 million company pool: to support broader based participation, especially in research-intensive businesses, the overall EMI pool should be increased for certain sectors. The current cap can mean too few employees benefit which is a missed opportunity

Making the most of EMI now

Until changes arrive, businesses should continue to grant EMI options early and consider spreading awards over time as the valuation rises and to allow for changes in exit strategies. Robust paperwork remains essential, and planning for later stages, such as potential secondary sales, is well worth the effort.

Looking forward

EMI has long supported high-growth British businesses, but it needs to keep up with the current demands of high growth businesses. By bringing the scheme up to date, especially for sectors moving at the speed of AI, the UK can keep its strongest founders and talent here, narrow the US compensation gap, and encourage innovation for the long term.

For more startup news, check out the other articles on the website, and subscribe to the magazine for free. Listen to The Cereal Entrepreneur podcast for more interviews with entrepreneurs and big-hitters in the startup ecosystem.