--- title: "EMI or Unapproved Share Option Scheme – which is best?" id: "7631" type: "post" slug: "emi-or-unapproved-share-option-scheme-which-is-best-for-you" published_at: "2020-12-26T21:50:36+00:00" modified_at: "2026-03-31T11:46:43+00:00" url: "https://seedlegals.com/resources/emi-or-unapproved-share-option-scheme-which-is-best-for-you/" markdown_url: "https://seedlegals.com/resources/emi-or-unapproved-share-option-scheme-which-is-best-for-you.md" excerpt: "Tax advantaged EMI scheme, or a more flexible Unapproved scheme? We explain the differences and how to decide which is right for your company." taxonomy_category: - "Option Schemes" --- 6 min read Expert reviewed This article has been fact-checked by a SeedLegals subject matter expert. [Meet our experts](https://seedlegals.com/authors-and-experts/) and learn more about our review process and quality assurance in our [editorial policy](https://seedlegals.com/editorial-policy/) . # EMI or Unapproved Share Option Scheme – which is best? Published: Dec 26, 2020 Updated: Mar 31, 2026 Contents [EMI and Unapproved option schemes are most relevant for UK startups and SMES](#emi-and-unapproved-option-schemes-are-most-relevant-for-uk-startups-and-smes) [What is an EMI scheme? What are Enterprise Management Incentive options?](#what-is-an-emi-schemewhat-are-enterprise-management-incentive-options) [What is an Unapproved option scheme?](#what-is-an-unapproved-option-scheme) [EMI vs Unapproved share option schemes – which is best?](#emi-vs-unapproved-share-option-schemes-which-is-best) [Comparison of EMI versus Unapproved share option schemes](#comparison-of-emi-versus-unapproved-share-option-schemes) [What’s the best way to set up an EMI or Unapproved option scheme?](#whats-the-best-way-to-set-up-an-emi-or-unapproved-option-scheme) [Talk to the experts](#talk-to-the-experts) Read Next [How to hire on a startup budget](https://seedlegals.com/resources/how-to-hire-on-a-startup-budget/) [How much should I pay my team? UK startup salaries revealed](https://seedlegals.com/resources/uk-startup-salaries/) [Share options explained: the essential guide for UK startups](https://seedlegals.com/resources/share-options-explained/) [EMI or Unapproved Share Option Scheme – which is best?](https://seedlegals.com/resources/emi-or-unapproved-share-option-scheme-which-is-best-for-you/) [The legal documents you need for your EMI share option scheme](https://seedlegals.com/resources/emi-share-option-scheme-legal-documents/) [Giving share options to customers and social media influencers](https://seedlegals.com/resources/giving-share-options-to-customers-and-social-media-influencers/) [Writer Tommy Hackley Senior Account Manager](https://seedlegals.com/resources/author/tommy-hackley/) [Editor Suzanne Worthington Senior Writer](https://seedlegals.com/resources/author/suzanne/) ‍Because of the considerable tax advantages, [EMI schemes](https://seedlegals.com/grow/share-options-scheme/emi-option-schemes/) are usually considered to be ‘better’. But [the best option scheme](https://seedlegals.com/grow/share-options-scheme/) for you depends on the circumstances of your company, who you want to grant options to, and how much flexibility you need. In this post, we explain (briefly!) how EMI and [Unapproved option schemes](https://seedlegals.com/grow/share-options-scheme/unapproved/) work, what’s similar, what’s different, and how to decide which type of option scheme to set up for your company. ### Contents - [EMI and Unapproved option schemes are most relevant for UK startups and SMEs](#most-relevant-schemes-for-uk-startups) - [What is an EMI scheme?](#emi) [What are Enterprise Management Incentives?](#emi) - [What is an Unapproved option scheme?](#unapproved) - [EMI vs Unapproved share option schemes – which is best?](#emi-unapproved-which-is-best) - [Comparison of EMI versus Unapproved share option schemes](#comparison) - [What’s the best way to set up an EMI or Unapproved option scheme?](#best-way-to-set-up-emi-or-unapproved-option-scheme) - [Talk to the experts](#talk-to-an-expert) ### Data revealed: UK share option schemes Want to know how other startups structure their share option schemes? Download the 2025 UK Share Options Report. [Download report](https://seedlegals.com/reports/share-options-report/) ## EMI and Unapproved option schemes are most relevant for UK startups and SMES If you’re reading this you probably know about the advantages of [incentivising your team with share options.](https://seedlegals.com/resources/share-options-explained/) All share option schemes are similar in that they allow you to reward your staff by giving them the right to buy shares in your company in the future (the **share option**) at a pre-agreed price (the **strike price** or **exercise price**). Your team can earn their share options if they work for you long enough ([time-based vesting](https://seedlegals.com/resources/vesting-milestone-or-exit-only-which-share-option-scheme-is-best-for-you/#:~:text=your%20needs%2C%20easy.-,Vesting,-Having%20decided%20which) ) or if they help you achieve specific business goals ([milestone vesting](https://seedlegals.com/resources/milestone-vesting/) ). When a team member exercises their options at some time in the future, they’ll be able to buy the shares at the strike price. If they sell them later at the market price, they will gain from the difference between the strike price and the market price. There are two types of option schemes that are most relevant for UK startups: - [Enterprise Management Incentive scheme](https://seedlegals.com/resources/what-is-an-emi-scheme/) Also known as: EMI scheme - [Unapproved scheme](https://seedlegals.com/resources/unapproved-share-options/) ‘Unapproved’ means that the scheme isn’t part of the UK government’s ‘approved’ tax-advantaged share schemes. There are other types of share and option schemes – such as Company Share Option Plans (CSOP), Share Incentive Plans (SIPs), Save As You Earn (SAYE) and others – but they’re generally not as useful for UK startups because they don’t offer the simplicity of Unapproved schemes or the tax benefits of EMI schemes. If you hear the term ESOP, that’s usually an American term meaning any Employee Share Option Plan (or Employee Stock Option Plan), so if you hear or read that you should set up an ESOP, for a small UK company that generally means setting up an EMI share option scheme. Easy. So we’ve determined that there are two types of option schemes relevant for startups. Next we’ll explain how these two schemes work, and how to decide which scheme is right for your company and team. Spoiler: many companies run *both* an EMI scheme and an Unapproved scheme. > **28%** of UK companies with SeedLegals option schemes**have both an EMI scheme and an Unapproved scheme**. (They might have more than one of either or both types.) For more insights on how startups design their option schemes, [download our 2025 report](https://seedlegals.com/reports/share-options-report/) > . > > [Tommy Hackley](https://seedlegals.com/resources/author/tommy-hackley/) > Senior Account Manager, > > [SeedLegals](https://seedlegals.com) ## What is an EMI scheme? What are Enterprise Management Incentive options? [EMI option schemes](https://seedlegals.com/resources/what-is-an-emi-scheme/) are popular with UK startups because they offer significant tax advantages which could be worth hundreds or even thousands of pounds to both your company and your option holders. Of course, such generous tax advantages come with [eligibility criteria](https://seedlegals.com/resources/what-is-an-emi-scheme/#what-are-the-qualifying-conditions-for-an-emi-scheme) and ongoing compliance requirements enforced by HMRC. These requirements apply to the: - **company with the EMI scheme** For example, companies in certain industries don’t qualify for EMI. ‘Excluded activities’ include farming, banking and legal services. - **options holders** (employees granted EMI options) For example, the employee must be a PAYE employee and spend at least 75% of their working time working for your company. - **shares** (if/when the holder exercises their options) For example, the shares must be ordinary non-redeemable shares. Importantly for EMI schemes, people who aren’t Directors of your company or on your PAYE payroll – consultants, advisors, non-executive directors and so on – are excluded. And because EMI schemes come with UK tax advantages, there’s no point granting an EMI option to an employee who isn’t (and isn’t likely to become) a UK taxpayer. **Giving equity to an advisor?** To decide what percentage of equity to give your advisor, first you need to determine what type of advisor they are. Read more in our post: [Startup advisor shares: How much equity should you give your advisor?](https://seedlegals.com/resources/how-much-equity-should-i-give-an-advisor/) Because there’s a limit to the amount of EMI options each company can allocate, so it’s sensible to grant EMI options only to UK employees – if you grant EMI options to non-UK employees, they count towards the £6 million limit (£3 million limit before 6 April 2026) but they and your company won’t get any tax benefits. For everyone not eligible for EMI options – excluded companies, freelancers and consultants, non UK staff etc – you can grant options from a separate scheme. Which is where an Unapproved scheme might be the solution you need. ##### SeedLegals option schemes ### EMI schemes made easy Create, automate and manage your EMI scheme on SeedLegals with unlimited help from our EMI experts. [Get started](https://seedlegals.com/grow/share-options-scheme/emi-option-schemes/) ## What is an Unapproved option scheme? An [alternative to EMI option schemes](https://seedlegals.com/resources/unapproved-share-options/) for UK companies is an [Unapproved scheme](https://seedlegals.com/grow/share-options-scheme/unapproved/) . It’s called ‘Unapproved’ because it’s your own scheme, without all the rules and regulations set by HMRC. Unlike an EMI scheme, when you set up an Unapproved scheme and issue options, the tax authorities don’t have to sign off anything. ‘Unapproved’ doesn’t mean the scheme is illegal or dodgy – merely that these schemes don’t come with any tax advantages because they aren’t endorsed by HMRC. The big advantage of Unapproved schemes is that you can grant options to people who don’t qualify for EMI options. This is why many companies set up both an EMI and an Unapproved option scheme – so you can offer share options to any co-workers and collaborators in a way that’s appropriate for their individual circumstances. ##### Unlimited options ### Keep your options open as you scale UK employees, international team members, consultants, advisors … whoever’s on your team, we make it simple to manage your employee equity. All for one low flat fee of £2,699 a year. [Get started](https://seedlegals.com/grow/share-options-scheme/) ## EMI vs Unapproved share option schemes – which is best? To help you decide which scheme is right for you, here are some questions to consider: - Is your company eligible for an EMI scheme? - Are your team members eligible to receive EMI options? - If you already have an EMI scheme, what’s the value of the shares under the options you’ve already granted? And do you have a valid EMI valuation? - What conditions do you want to set for your option holders? Still not sure? Take a look at the table below to compare EMI and Unapproved schemes side by side: ## Comparison of EMI versus Unapproved share option schemes | | EMI options | Unapproved options | | --- | --- | --- | | Qualifying criteria for company | based in UK, or have a permanent establishment in the UK employs fewer than 500 full-time employees (250 for grants before 6 April 2026) max £120 million gross assets (£30m for grants made before 6 April 2026) independent company, not owned by parent or holding company any subsidiaries are more than 50% owned, and not controlled by anyone else must not carry out ‘excluded activities’ – these include banking, farming and property development | None | | Qualifying criteria for option holder | PAYE employee or director of the company they work for you at least 25 hours a week or, if less, 75% of their weekly working time they hold no more than 30% of your company shares, or are entitled to less than 30% of assets in a close company | No statutory criteria – up to you to decide which service providers qualify | | Maximum value of shares under options, per company | £6 million (£3m for grants made before 6 April 2026) | No maximum | | Maximum value of shares under options, per option holder | £250,000 | No maximum | | Agree company valuation and strike price with HMRC | Yes – agree valuation with HMRC | No – set your own valuation | | Deadline to register option grant with HMRC | 6 July following the end of tax year the grants were made in (92 days after grant for grants made before 6 April 2024) | Only needed if grant given to UK-based employee or director | | Can be set up and managed on SeedLegals | Yes Set up an EMI option scheme | Yes Set up an Unapproved option scheme | ## What’s the best way to set up an EMI or Unapproved option scheme? On SeedLegals we’ve automated EMI and Unapproved option schemes so you can build and run your scheme yourself. To get started, you’ll need an annual [Share Options Subscription](https://seedlegals.com/pricing/) . If you want to check out the workflow first, [sign up for a 7-day free trial](https://app.seedlegals.com/login/) . After you log in, navigate to **Share Options**. You can ask our experts for help to choose the right scheme, the vesting schedule and exercise terms for your team. We’re here to guide you through every step. All the documents you need are generated automatically on SeedLegals, including the scheme rules, option grants, tax elections and more. ## Talk to the experts To get answers to your questions or to get started on building a share option scheme (or schemes) for your team, [book a free call](https://seedlegals.com/talk-to-an-expert/) with our experts. - Sources 1. [Gov.uk | Tax and Employee Share Schemes | Enterprise Management Incentives (EMIs)](https://www.gov.uk/tax-employee-share-schemes/enterprise-management-incentives-emis) | Accessed 22 May 2023 #### Tommy Hackley Equity strategist Tommy loves to use his legal background to help founders incentivise their teams with equity. [Read more](https://seedlegals.com/resources/author/tommy-hackley/) [https://www.linkedin.com/in/tommy-hackley-53a6101a9/](https://www.linkedin.com/in/tommy-hackley-53a6101a9/) Next up in [SeedLegals Academy](https://seedlegals.com/seedlegals-academy/) [The legal documents you need for your EMI share option scheme](https://seedlegals.com/resources/emi-share-option-scheme-legal-documents/) Our team of experts is here to help Bring all your questions – we’ve got the answers! We’ll match you with the right specialist. [Pick a time](https://seedlegals.com/talk-to-an-expert/) ## Related posts [3 min read Run multiple option grants in one go – now live on SeedLegals We’ve made option grants faster and easier to run on SeedLegals. Set shared terms once, tailor where needed and send agr... Kirsty MacSween](https://seedlegals.com/resources/group-option-grants/) [4 min read SeedLegals vs Vestd: smarter equity management with unlimited options and support The SeedLegals all-inclusive options plan costs just £2,699/ year, with unlimited schemes, grants and support. Check out... Kirsty MacSween](https://seedlegals.com/resources/seedlegals-vs-vestd-comparing-equity-management-platforms/) [5 min read Unlock the full power of your options subscription: a complete how-to guide to options on SeedLegals Your option scheme is much more than just admin – it’s one of the most powerful tools you have to reward your team and f... Kirsty MacSween](https://seedlegals.com/resources/guide-to-options-subscription/)