As fast-growth companies compete for top talent, equity incentives can be a powerful part of your hiring strategy. Two of the most common share schemes are EMI (Enterprise Management Incentives) and SIP (Share Incentive Plans) – but they serve very different purposes.
Sarah Anderson from RM2 (employee ownership and share scheme specialists) gives a simple breakdown to help you choose the right one.
What is an EMI scheme?
An EMI scheme is designed specifically for high-growth, entrepreneurial UK companies. It allows you to grant share options to key employees, giving them the right to buy shares in the future at a fixed price.
Why EMIs are popular with scale-ups:
- Very tax-efficient for employees (often no income tax or NICs on exercise)
- Gains are usually taxed at Capital Gains Tax rates on exit
- Highly flexible – ideal for senior hires, leaders, and critical roles
- Works well when a company plans for rapid growth or an exit
- Available to companies with up to 249 full time equivalent employees (increasing to 499 from 6 April 2026)
- From 6 April 2026, the ten year limit on tax efficient EMI option exercise will increase to 15 years, which gives an excellent lead time for companies with longer term exit strategies
Key limitations:
- Only available to companies with £30m or less in gross assets (increasing to £120m from 6 April 2026)
- Individual employees can hold options worth up to £250k – not available for non-employees or those that work less than 25 hours a week or 75% of their working time
- Companies can grant options worth a total of £3m (increasing to £6m from 6 April 2026)
- Employees can’t hold more than 30% of the company’s shares (on grant)
- Not all sectors qualify, and there are some specific rules relating to qualification that should always be checked (for example, whether or not companies are involved in joint venture arrangements)
What is a SIP?
A Share Incentive Plan (SIP) is an all-employee share scheme. It allows companies to give shares to employees, or allow employees to buy shares, in a tax-advantaged way, provided everyone is invited on similar terms.
Why companies use SIPs:
- Encourages broad employee ownership
- Great for building long-term engagement and loyalty
- Allows employees to receive dividends on their shares (unlike an EMI share option)
- Strong tax benefits if shares are held for at least 5 years – if all the rules are followed, SIPs can deliver a zero tax rate (no income tax, no NICs, and no capital gains tax)
- Very flexible offering (eg free shares, shares that are bought, and the opportunity for employees to “buy one get two free”)
Key limitations:
- Less flexible than EMI
- Not targeted at key hires or leadership roles
- More commonly used by established or larger businesses
- Can be complex to operate – for example, a separate trust must be established to hold the shares
EMI vs SIP: Which should fast-growth companies choose?
For most fast-growth UK companies that are hiring, EMI is usually the better fit:
- It helps attract senior talent when cash is tight
- It aligns key hires with company growth and exit outcomes
- It’s simpler to tailor incentives to specific roles
SIPs can still be valuable, but they tend to work best once a company is more established and looking to reward a broad workforce rather than drive early-stage growth.
Adapting to change
Once a share plan is in place, it’s not possible simply to change it to another type of share plan: so, for example, if your company decided that a SIP was more appropriate than a pre-existing EMI, a new SIP plan would need to be adopted – and, potentially, the EMI plan closed down. Often companies will operate more than one type of plan concurrently, either because they have ceased to qualify for EMI, or simply in order to achieve different outcomes.
Managing your share plan
One point often overlooked by businesses is the day to day administration of the share plan once it’s been implemented. There are two aspects to this.
Firstly,it’s very important to keep good records of all your share plan awards, including details of the dates of grant, lapse and exercise. This is because you’ll need to submit a share plans return to HMRC for your EMI (and every other type of employee share plan arrangement) every year.
Secondly, you need to be sure that, should a sale arise, your plan is in good shape for the acquisition process and due diligence. Take care to keep records of everything to do with your share plan. That might include shareholder resolutions, board minutes, valuation agreements with HMRC, and records of decisions relating to, for example, the treatment of good leavers, as well as copies of the share plan documentation itself. Some details may seem so minor that they are overlooked – for example, ensuring any option agreements are correctly executed and witnessed.
This is because, if you sell your company in the future, your buyer will certainly carry out a detailed due diligence exercise relating to your share plan. Buyers want to be sure that no tax issues arise out of incorrectly implemented and administered share plans. They are very likely to pick up on what seem to be trivial points, but which can nonetheless hamper the sale process. Having all this information in place can help smooth this part of any acquisition process and protect you against price chipping or additional onerous warranties.
Getting the plan right in the first place, and continuing to get it right throughout its lifetime, is fundamental to a successful share plan. Often your accountant or other adviser can help with the ongoing support and administration – RM2 are happy to chat through your options – let us know if you’d like to have a chat.
Final thought
If you’re scaling quickly and competing for top talent, an EMI scheme can be one of the most powerful tools in your hiring toolkit. As always, eligibility and structure matter, so advice is essential before setting one up. There are certain events that can cause EMI options to become disqualified after they’ve been granted, so it is important to make sure that you are aware of those rules or you may inadvertently lose the EMI tax advantages.
