Chancellor Rachel Reeves is facing calls to implement a 'simple fix' to a key shares scheme for small businesses in her upcoming Budget, a move that could unlock hundreds of millions of pounds in tax incentives and provide a major boost to the UK's technology sector.
The Push for EMI Reform
The appeal centres on the Enterprise Management Incentives (EMI) scheme, which permits smaller companies to grant share options to employees without incurring income tax or National Insurance liabilities. Proposals to modernise the scheme, specifically by lifting its current cap, were initially reported last month.
Tom Leathes, the chief executive and co-founder of the car marketplace tech giant Motorway, has publicly championed the change ahead of the Budget on 26 November. He stated that if the Chancellor follows through, it would represent a 'massive boost for UK tech'.
How the Current EMI Scheme Works
The existing framework for EMI share options has a cap of £250,000 that can be granted to an employee over a three-year period. This benefit is available to companies with assets worth £30 million or less and which employ fewer than 250 people.
According to official figures, the scheme represented a cost of £670 million to the exchequer in the 2022-23 financial year. Despite this cost, it is widely regarded as a vital tool for attracting top talent.
Why the Scheme is Deemed 'Badly Outdated'
Leathes described the EMI as 'one of our best tools for attracting talent to high-growth companies'. However, he identified two critical flaws that are holding businesses back.
Firstly, the 10-year expiry on options encourages founders to seek an early exit for their company rather than building a long-term, sustainable business.
Secondly, the 250-employee cap often hits firms at the worst possible time—just when they are trying to scale up and need to hire experienced senior operators who specialise in growth.
Leathes emphasised that these are 'simple fixes that won't cost the treasury much', but argued their impact on the UK's ability to construct world-class technology companies would be profound.
