Small firms that reward staff with share options are set to lose one of their more tedious HMRC chores, after the government published draft legislation scrapping the requirement to notify the taxman separately every time an Enterprise Management Incentive option is granted.
Under proposals included in the draft Finance Bill 2026-27, published on 13 July, companies operating EMI schemes would report new option grants through their existing annual EMI return rather than filing a standalone notification for each grant.
For the thousands of growing businesses that use EMI to compete for talent against deeper-pocketed rivals, the change removes a compliance trap that has caught out many an otherwise well-run company. Miss a notification and the tax advantages that make the scheme worthwhile can be put at risk.
Cam Wright, a Senior Associate at audit, tax and business advisory firm Blick Rothenberg, said: “As part of the draft Finance Bill 2026-27, HMRC have published proposals to simplify the grant reporting process. Reducing the reporting burden should make EMI more appealing to businesses.”
He added: “The proposals remove the requirement for companies to separately notify HMRC about EMI option grants. Instead, options granted on or after 6 April 2027 would be reported through the existing annual EMI return.”
EMI is widely regarded as the most generous of the government’s tax-advantaged share schemes, and a mainstay for SMEs incentivising staff through an employee share scheme rather than cash bonuses alone. Qualifying companies can grant options worth up to £250,000 per employee over a three-year period, normally free of Income Tax and National Insurance for the recipient.
Wright said: “EMI options are a tax-advantaged share option scheme approved by the Government. They are designed to help small to medium-sized businesses recruit and retain key talent. EMIs remain one of the UK’s most valuable tax-advantaged share incentive arrangements available for qualifying companies.”
The reform will be particularly welcome to founders who see employee ownership as central to their recruitment pitch but have long complained that the compliance burden on entrepreneurs keeps growing even as ministers talk up simplification.
He added: “The proposed changes will also consolidate reporting through the annual EMI return, reduce the administrative requirements for companies operating EMI schemes and simplify the process of granting EMI options while maintaining HMRC reporting requirements through the existing annual filing framework. While this change was originally announced at Budget 2025, the publication of draft legislation represents a significant step towards implementation.”
The draft clauses are open for technical consultation until 7 September 2026, with the final contents of the Bill subject to the Chancellor’s decision.
Wright said: “The proposal forms part of a broader trend towards modernisation and simplification across the UK’s shares and incentives landscape.”
Until the new rules take effect, companies granting EMI options must continue to notify HMRC under the current framework. Business owners planning grants around the April 2027 changeover should take advice on timing, and on keeping their annual returns in good order, since that single filing will soon carry all the weight.
