For many startups and scaleups, offering employee retention incentives remains a critical way of keeping talent motivated to build a business from the ground up by giving them a stake in future growth. The United Kingdom continues to provide several well-established and tax-efficient mechanisms to support this.

The Enterprise Management Incentive (EMI) scheme remains the most popular. Following recent Budget changes, it is now available to a broader range of growing companies. To qualify, companies must have gross assets of no more than £120 million (increased from £30 million) and fewer than 500 employees (up from 250). The total value of EMI options that can be granted has also increased to £6 million. EMI allows businesses to grant options over shares, typically at today’s market value, with significant tax benefits: no Income Tax or National Insurance on grant or exercise (if issued at market value), and gains on sale are generally taxed at capital gains rates, potentially with Business Asset Disposal Relief. EMI remains flexible — options can vest on exit, time or performance milestones — making it a powerful tool for securing top talent.

The Company Share Option Plan (CSOP) continues to be available to a wider range of companies, with fewer restrictions on size or sector. Employers can grant up to £60,000 of options per employee. Gains are exempt from income tax and National Insurance if the option is held for at least three years, making it a useful option for more established businesses or those that do not qualify for EMI.

Growth shares remain a private contractual arrangement, commonly used where approved schemes are unavailable or unsuitable. Employees are issued shares that only participate in value above an agreed threshold, aligning incentives with the creation of new shareholder value. For entrepreneurs, they offer flexibility in tailoring incentives without the statutory restrictions of approved plans. 

Together, these schemes continue to help entrepreneurs conserve cash, attract skilled employees, and share success fairly as the business scales

Further reading

This entry was written by Sarah-Jane Butler. Sarah-Jane is the Founder of Farringford Legal and an Adviser to The Entrepreneurs Network. Her and her team are passionate about becoming a growth partner to entrepreneurs and their growing businesses, giving them peace of mind and helping them thrive.