Alastair Wilson, Tax Partner at UNW, explores how expanded Enterprise Management Incentive (“EMI”) schemes could support North East businesses facing rising employment costs.
For many businesses in the North East, one of the central challenges in 2026 is not simply winning work but preserving margin after paying higher wages, higher employment taxes and the wider costs of retaining good people in a competitive market.
The media is full of commentary from businesses highlighting that those pressures are real and measurable. From 6 April 2025 the employer National Insurance rate increased from 13.8% to 15%, while the secondary threshold at which employers start paying NIC fell from £9,100 to £5,000, increasing the NIC cost attached to many roles.
On top of that, the National Living Wage for workers aged 21 and over rose again to £12.71 an hour from 1 April 2026, up from £12.21 in the prior year. This means cash-based reward packages have become more expensive before any discretionary pay rises or bonuses are considered.
Enterprise Management Scheme changes
Against that backdrop, the expansion of the EMI Scheme regime from 6 April 2026 is highly significant. The legislative changes increase the employee limit from 250 to 500, raise the gross assets threshold from £30 million to £120 million, and double the company-wide options limit from £3 million to £6 million.
For many businesses, the increase in the employee limit is likely to be the most beneficial change. Having worked as a tax adviser throughout the period that the EMI rules have existed, I have supported a number of businesses that had previously outgrown the employee limit.
The increase in the qualifying thresholds is especially important for our regional businesses. The North East has a number of groups founded here that have grown successfully in recent years and may have been pushed outside the previous EMI limits. Some of those companies or groups will now be able to grant further EMI options, as businesses that previously exceeded the employee or gross assets tests can reassess eligibility from 6 April 2026.
In some circumstances, companies that outgrew the size limits for EMI schemes have instead used other share option awards which are less tax efficient. For those businesses, it may even make sense to agree with staff to surrender existing options and regrant new qualifying EMI options.
The same reforms also extend the maximum exercise period from 10 years to 15 years. The government’s stated objective is to help more growing companies use EMI to incentivise and reward employees effectively, align employer and employee interests, and support continued scale-up.
In simple terms, a much larger group of privately owned companies can now consider a tax-advantaged option plan where EMI may previously have been unavailable once the business reached a certain size.
North-East relevance
That widening of access matters in the North-East because the region has the fewest private sector businesses of any English region, and the majority are small or medium-sized enterprises.
It is also a region where many firms operate in cost-sensitive sectors such as manufacturing, logistics, construction and hospitality, and where average business profitability has been reported as below the UK average. As a result, additional payroll costs can quickly squeeze investment and recruitment plans.
For those businesses, an EMI scheme can work not as a substitute for provision of monthly take home pay, but as an additional long-term layer on top of salary that is tied to business performance. EMI options give employers another way to reward key staff when pure cash compensation is harder to fund and less efficient as a retention tool.
Recruitment and retention
The real strength of EMI in this climate is that it allows a business to share future value rather than relying solely on present cash. This is particularly attractive when owners want a senior management team to work with them to create longer-term value for both shareholders and management.
As a tax adviser, I have worked on numerous company sale transactions where key management have benefitted significantly from their EMI options when the business is sold.
That aligns with HMRC’s policy rationale: the reforms are intended to help employers attract and retain high-calibre candidates by giving larger and growing private companies access to tax-advantaged share options that link reward more closely to growth.
For a North East company competing for talent against larger national employers, private equity-backed groups or businesses able to offer higher base salaries, a well-structured EMI plan can therefore become a differentiator. It signals to ambitious employees that they are being invited to share in the upside they help create.
Conclusion
EMI will not suit every company. The wider qualifying conditions still apply and the individual limit remains unchanged at £250,000. However, for many North East businesses facing higher wage expectations, increased employer NIC and tight margins, using an EMI scheme in 2026 is now more flexible and represents a commercially sensible way to recruit, retain and motivate people without relying solely on ever-rising payroll spend.
If you would like more information about the topics discussed in this article, please get in touch with alastairwilson@unw.co.uk.