EMI vs Unapproved Share Options: A Brief Comparison

November, 2025
Estimated Reading Time: 3 minutes

Options are an incredibly popular incentive for both employers, providing a cost-effective way to attract and retain employees, and employees, who benefit from receiving a stake in the company they work at.

In the UK, the two types of option schemes relevant to startups and high growth businesses are the:

  • Enterprise Management Incentives scheme (aka, the “EMI Scheme”); and
  • Unapproved Options scheme.

In this article, we are going to delve into the key differences between the two schemes, enabling you as employers to make the best-informed decision as to which scheme best suits your needs.

EMI vs Unapproved Share Options — a brief comparison
EMI UNAPPROVED
RIGHT ACQUIRE THE OPTION Both EMI and Unapproved Option schemes give option holders the right to purchase shares for a fixed price (often referred to as the “Exercise Price”) once the option holder has met specific time and/or performance-based milestones.
IS YOUR COMPANY ELIGIBLE? In order to qualify for EMI, your company must meet the:

  • Independence requirement: the company must not be either (a) majority owned by another company, or (b) under the control of another company;
  • Qualifying subsidiaries requirement: the company must only have qualifying subsidiaries, meaning that the company whose shares are subject to EMI holds more than 50% of the ordinary share capital of the subsidiary;
  • Gross assets requirement: the value of the company’s gross assets must not exceed £30,000,000.00;
  • Employees limit requirement: the company must have fewer than 250 full time employees; and
  • Excluded activities requirement: the company won’t qualify for EMI if one or more “excluded activities” form a substantial part of the company’s trade.
 Don’t meet the EMI requirements?

Look no further, as there are no criteria for qualifying for an Unapproved Option scheme!
IS YOUR STAFF ELIGIBLE? You can only make your EMI scheme available to individuals who:

  • are employees (paid under PAYE) of the company whose shares are the subject of the options, or directors of the company;
  • meet the working time commitment requirement: employees are eligible only if they are required to spend (a) at least 25 hours each week, or (b) if less, 75% of their working time, in each case working as an employee for the company whose shares are subject to the EMI option; and
  • do not have a material interest in the company whose shares are under option.
 Yes, whether the individual is a:

  • non-UK based employee;
  • non-PAYE staff;
  • part-time staff;
  • contractor;
  • etc.,

 

the Unapproved Option scheme can be made available to everyone.
TAX TREATMENT Want to save you and your employee large sums of cash (legally)…?

The EMI scheme provides generous tax benefits to both the company and the option holder:

  • 0 (yes, zero!) income tax and National Insurance contributions (“NICs”) are payable on the grant and, in some limited circumstances, the exercise of EMI options;
  • Capital gains tax (“CGT”) is payable on the sale of EMI options; and
  • Business Asset Disposal Relief (“BADR”) may be available in certain circumstances, the effect of which is to reduce the CGT rate payable to 14% in the 2024/25 tax year (which is expected to rise to 18% in the 2026/27 tax year).
 The reason why this scheme is “unapproved” is because there are no rules and regulations set by HMRC, which also means that there are no tax benefits for employees or companies.
LIMITS The maximum value of EMI options that can be granted:

  • per employee: £250,000.00; and
  • by the granting company or group: £3,000,000.00.
 No limits.
EASE OF SETTING UP A SCHEME To set up an EMI scheme, you need to:

  1. make sure you meet all eligibility criteria above;
  2. think about your goals and consider the most appropriate structure (i.e., who should participate? is vesting going to be time or performance based? what is the exercise price? what happens if an employee leaves?);
  3. obtain an EMI Valuation from HMRC — not a compulsory requirement but can help ensure that the tax advantages aforementioned apply;
  4. create your option pool and start granting options;
  5. register the EMI scheme; and
  6. remember to tell HMRC of your scheme in your annual return.
 The process is much simpler. No need for a valuation, simply:

  1. create a plan (number of options to be granted, exercise price, exercise date, etc.);
  2. talk to your team/option holders;
  3. keep a record of everything; and
  4. remember, in some cases, you may have to inform HMRC of your scheme in an annual return.
ANNUAL RETURNS You need to submit an annual return notifying HMRC of the scheme and informing them of whether certain events occurred. In some circumstances, you will also have to submit an annual return for your Unapproved Option scheme.

Next Steps
Ready to start rewarding your staff with options? Get in touch with our share incentives experts by reaching out to us at [email protected] or 020 7952 1723.

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