ETASSUM50500 - Enterprise Management Incentives (EMI): Finance Act 2026 Limits & Exercise Period Changes
Section 13 Finance Act 2026
Overview of changes
All references are to Schedule 5 ITEPA, unless otherwise stated.
From 6 April 2026, the EMI limits will be increased for most companies as follows:
company options will be increased from £3 million to £6 million (ETASSUM51060)
gross assets will be increased from £30 million to £120 million (ETASSUM52060)
the number of employees will be increased from less than 250 to less than 500 (ETASSUM52070)
Additionally, for employer companies to which the increased limits apply, the limit on the qualifying exercise period will be increased from 10 years to 15 years for new options. Existing options that have not already lapsed, expired or been exercised can also be amended to provide for an extended qualifying exercise period of up to 15 years from grant. The option must be exercised on or after 6 April 2026 to take advantage of this change.
Where the employer company is a Specified Company (as defined below), the limits increase and extended exercise period will not apply.
Amending existing option agreements to extend the exercise period
HMRC will allow the lapse date and exercise period of existing EMI option agreements to be extended to take advantage of the new 15 year qualifying exercise period, provided that the option is exercised on or after 6 April 2026 and had not already lapsed, expired or been exercised at the time of variation. For the vast majority of cases, such as specified event based options (ETASSUM54340), the amendment can be made in accordance with the terms of the option agreement, without impacting the fundamental terms of the option and therefore does not need to be in accordance with paragraph 37A. The discretion rules in ETASSUM54300 continue to apply.
Examples of amendments that will not need to be made in accordance with paragraph 37A are:
An increase in the lapse date of the option from 10 years to 15 years, or
An increase in the exercise period of a time-based option which was exercisable between the 8th and 10th anniversaries of grant to an exercise period of between the 8th and 15th anniversaries of grant.
Fixed-date qualifying options
In circumstances where an EMI option is exercisable only on one fixed date, a variation to extend the exercise date, would ordinarily amount to a change to the fundamental terms of the option, resulting in a release and re-grant. Paragraph 37A has been introduced to ensure that such situations do not occur. Therefore, where such a variation is made to a fixed date option, the variation must be made in accordance with paragraph 37A.
Paragraph 37A applies only to such fixed-date qualifying options – it does not apply to options exercisable only on a specified event, such as an exit, where the date of that event is not fixed at the date of grant.
Paragraph 37A requires that:
A variation is made by way of a written agreement between the person who granted the option and the person entitled to exercise it, and
The variation is made on or after 26 November 2025, and
The date of variation is on or before the 10th anniversary of the date of grant, and
The effect of the variation is that the option can be exercised on a single date falling on or before the 15th anniversary of the date of grant.
The variation must be made in accordance with paragraph 37A, where for example;
The option is exercisable upon only the 10th anniversary of grant, and that date is being deferred so that it is only exercisable upon the 15th anniversary.
The option is exercisable upon only the 6th anniversary of grant, and that date is being deferred so that it is only exercisable upon the 12th anniversary.
The option is exercisable upon only the 7th anniversary of grant, and that date is being deferred so that it is only exercisable upon the 9th anniversary.
The option is exercisable only on 31 December 2030, and that date is being deferred so that it is only exercisable on 31 December 2035.
It is not permissible for an amendment to be made to bring forward the date on which the option can be exercised. Such an amendment would result in a change to the fundamental terms of the option and therefore result in a release and re-grant of the option. This applies whether or not the amendment is required to be made under paragraph 37A.
An example of an unacceptable amendment would be:
An amendment to bring forward the exercise period of a time-based option which was exercisable between the 8th and 10th anniversaries of grant to an exercise period of between the 6th and 10th anniversaries of grant (or indeed one between the 6th and 8th anniversaries of grant).
Whether an option can be amended to extend its lapse date or exercise period to take advantage of the new 15 year qualifying exercise period depends on whether the relevant employer company is a Specified Company at the time of the variation. This applies whether or not the amendment is made (or is required to be made) under paragraph 37A.
Whether to make these amendments is a decision for companies and their advisers, HMRC will not provide guidance on individual cases.
Meaning of ‘employer company’
The employer company refers to the company that satisfies the employment requirement in paragraph 1(3)(d). In a group situation, where the option is granted by reason of the individual’s employment with a member of the group (not the parent company), the employer company will be the relevant subsidiary company.
Example:
B ltd is a qualifying subsidiary of parent company, A ltd. Dakota is an employee of B ltd and is granted an EMI option by reason of their employment in B ltd. The employer company in this case is B ltd.
Meaning of ‘Specified Company’
The term ‘Specified Company’ in this guidance means a Specified Northern Ireland Company as defined in paragraph 57F as a company that:
has its registered office in Northern Ireland, and
carries on a trade involving either,
a trade in goods, or
the generation, transmission, distribution, supply, wholesale trade or cross-border exchange of electricity.
Application of EMI limits in a group where a qualifying subsidiary is a Specified Company
If one or more of the qualifying employer companies in a group is a Specified Company, which limit applies will depend on whether the relevant employer company is a Specified Company or not. However, the limits continue to be applied against the group as a whole.
In practice this means:
Where an option is being granted to an employee of a Specified Company in the group, the limits to be applied against the group as a whole remain as the pre-6 April 2026 limits.
Where an option is being granted to an employee of a Non-Specified Company in the group, the limits to be applied against the group as a whole are the increased limits that apply from 6 April 2026.
Example:
A group with gross assets of £40m is considering granting EMI options to both employees of a Specified Company and employees of a Non-Specified Company. The limits are applied as follows:
Options granted to employees of the Specified Company will not be qualifying because the £30m gross asset limit will apply, which has been exceeded.
Options granted to employees of the Non-Specified Company will qualify because the £120m gross asset limit will apply.