Autumn Budget 2025 introduced significant changes to employee incentive schemes that will impact businesses across the UK. From enhanced enterprise management incentive (EMI) limits to new restrictions on pension salary sacrifice arrangements, these updates require careful consideration by employers and their advisors.
EMI limits increased
From April 2026, the government will significantly expand access to tax-advantaged EMI options by increasing key eligibility thresholds:
- the overall limit on company options will double from £3 million to £6 million
- the gross assets threshold will quadruple from £30 million to £120 million
- the employee headcount limit will increase from 250 to 500 employees.
The limit on the exercise period of EMI options will also be increased from 10 to 15 years. Existing qualifying options granted before April 2026 (which have not been exercised or expired) can also be amended to extend their life without losing their tax-advantaged status.
The tax advantages of EMI options remain attractive. Qualifying options granted at market value are generally exempt from income tax and national insurance contributions on exercise, with capital gains tax applying only on disposal of shares. Business Asset Disposal Relief may further reduce the tax burden for qualifying disposals to 14% (18% from April 2026).
The changes to EMI eligibility represent an exciting opportunity for growing companies, including those who have previously outgrown EMI, to offer attractive, tax-advantaged incentives to their employees. Preparations can be undertaken now, including putting in place new plans where needed, so grants can be made as soon as the changes come into effect in April 2026. EMI options have the potential to enhance a company's ability to attract and retain talent through equity participation in a competitive employment market.
See here for more information on EMI options.
Pension salary sacrifice changes
A significant change to pension arrangements will take effect from April 2029. Salary-sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from national insurance contributions. Contributions above this cap will be treated as ordinary employee pension contributions, subject to both employer and employee NICs. However, ordinary employer pension contributions will remain exempt, and salary sacrifice arrangements will continue to benefit from income tax relief (subject to applicable limits).
Employers should prepare for this change by reviewing their current pension arrangements and updating payroll systems. HMRC will publish further guidance before the April 2029 implementation date.
Employee ownership trust relief reduction
The government has reduced the capital gains tax relief on disposals to employee ownership trusts from 100% to 50%. This change took effect immediately upon announcement, significantly impacting the tax efficiency of EOT transactions for business owners considering employee ownership structures.
PISCES and tax-advantaged share plans
The government has confirmed that existing EMI and Company Share Option Plan (CSOP) contracts can be amended to include sales on the Private Intermittent Securities and Capital Exchange System (PISCES) as exercisable events without losing tax-advantaged status. This change will be legislated in Finance Bill 2026-27 and applies retrospectively from 15 May 2025 for changes to terms of options granted before 6 April 2028, which represents a two year extension to the timing previously announced.
Importantly, the PISCES provision must be included in the option agreement in writing. Reliance on discretionary provisions will not preserve tax-advantaged status. From 6 April 2028, any PISCES provision must be included at grant, and subsequent amendments may affect the tax-advantaged status.
SIP and SAYE response to call for evidence
The government has published a summary of responses to its call for evidence on Share Incentive Plans (SIP) and Save As You Earn (SAYE) schemes. Respondents confirmed that these all-employee schemes effectively align employee and shareholder interests, particularly benefiting lower-paid and junior employees who might not otherwise receive equity incentives.
Participation varies significantly by remuneration level, with middle and higher-income earners participating more than lower-income employees, where affordability is one of the barriers.
The government will now consider stakeholder suggestions and make any tax policy decisions at future fiscal events, no changes have currently been confirmed. HMRC will review guidance for the schemes and continue working with stakeholders on administration.
Here to help
Please get in touch with a member of our Employee Incentives team if you need assistance or any further information.
