VALUATION & GROWTH

EMI Options vs Growth Shares: Finding the Optimal Equity Incentive

Compare the tax efficiency and mechanics of EMI versus Growth Shares to select the best equity structure for your key employees.

⊛ 1 min read | By Brent Morrison | November 2025

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Common Questions About Equity Incentives

What is the main difference between EMI and Growth Shares?
EMI is an HMRC-backed option scheme with the lowest possible tax rates (14%, going to 18% from 6 April 2026 BADR), but strict eligibility criteria. Growth Shares are a structural equity class designed to incentivise employees based on future value only. Growth shares are typically used when a company is too large or ineligible for EMI.
Why can't every company use EMI options?
EMI has strict limits. Your company must have fewer than 250 employees and less than £30m in gross assets. Additionally, certain trades (like banking, property development, and legal services) are excluded. If you hit these limits, Growth Shares are often the most tax-efficient alternative.
Are Growth Shares better than Unapproved Options?
Almost always, yes. Unapproved options are taxed as income (up to 45% + NICs) when exercised. Growth Shares are structured to be subject to Capital Gains Tax, making them significantly more tax-efficient for the employee upon exit.
What is a "Hurdle Rate" in Growth Shares?
A hurdle rate ensures existing shareholders aren't diluted on the value they have already built. Growth Shares only have value if the company grows above a specific valuation threshold (the hurdle). If the company sells for less than the hurdle, the Growth Shares are worth nothing.
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Tax planning expertise for UK high-growth company equity and incentives.

Brent Morrison. Strategic accountancy partner at OutRise

ABOUT THE AUTHOR

Brent Morrison ACA CTA

Chartered Accountant and Chartered Tax Adviser

Member of the Institute of Chartered Accountants (ICAEW) and Taxation (CIOT) | Director at OutRise | He has over 12 years of experience advising high and fast growth companies across the UK. His approach combines a deep understanding of structuring data and systems, coupled with practical, real-world business experiences.

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