EMI share options for your first hire: the April 2026 expansion, the 92-day HMRC clock, and the worked arithmetic for a UK SaaS founder

Your first hire is the single most expensive and most consequential decision a UK indie SaaS founder makes. The shape of the offer - cash salary, equity, or a mix - determines whether you can afford the senior dev you actually need, or end up with a junior who can write code but cannot ship a feature alone. The Enterprise Management Incentive (EMI) is the UK government's answer to that problem: a tax-favoured share option scheme that lets you pay your first hire less cash today by giving them a stake in the upside. Done right, EMI can turn a GBP 60k-cash-only hire into a GBP 35k-cash-plus-options hire who is actually more committed than the cash-only version.

The big news for 2026 is that the EMI regime expanded substantially in April. The headcount limit doubled (from 250 to 500), the gross asset cap quadrupled (from GBP 30m to GBP 120m), and the option-pool ceiling moved up. For an indie SaaS founder, these changes mean EMI is now usable from your first hire all the way to a Series A team of 80-100 people without needing to convert to an unapproved scheme. That is a meaningful simplification.

Search "EMI share options first hire" and the first page of results is law firms (Sprintlaw, Waterfront, Orrick) and accountancy explainers (Outrise, Equidam, Legal Foundations). They cover the mechanics well but they're written for the founder who has already raised - paid setup, paid valuation, paid lawyer. The actual question for an indie hacker is different: when does EMI become worth the GBP 800-1,500 setup cost, what does a realistic first-hire grant look like in GBP, and where is HMRC strict on the rules versus where is there genuine flexibility.

This post walks the April 2026 expansion, the 25-hour working-time test, the 92-day HMRC notification rule, and a worked GBP example on a 15k base + 20k EMI grant at a 750k pre-money valuation so you can see the arithmetic from both sides of the offer letter.

What EMI actually is in 2026

EMI is a UK-government-approved share option scheme. The mechanism: you grant your hire the right to buy a fixed number of shares in your company at today's price, exercisable on a schedule (typically four-year vesting with a one-year cliff). The hire pays nothing today. They exercise the option later - usually on an exit event or a few years in - at the strike price set today. The difference between strike and market value at exercise is the gain.

The tax magic of EMI is that the gain on disposal qualifies for Business Asset Disposal Relief (the rebadged Entrepreneurs' Relief): 10% capital gains tax on the first GBP 1 million of gain, 20% above. Compare to an unapproved share option scheme where the same gain is taxed as employment income at up to 45% income tax + 2% NI on the employee + 13.8% employer NI on the company. The EMI route is a 35-point swing.

For a first hire who joins at a pre-seed stage and rides the company to a Series A or trade exit, the difference between EMI and unapproved options on a GBP 500,000 gain is roughly GBP 175,000 in their pocket vs HMRC's. That is the lever EMI gives you in the offer letter.

The April 2026 expansion

The April 2026 changes are the first substantive expansion of EMI since the scheme was introduced in 2000. The headline:

Limit	Pre-Apr 2026	Post-Apr 2026
Company gross assets	GBP 30m	GBP 120m
Company headcount	250 employees	500 employees
Total option pool (per company)	GBP 3m	GBP 6m
Individual grant cap (per employee)	GBP 250k	GBP 250k (unchanged)

The headcount and gross-asset doubling/quadrupling matter most. They mean a UK SaaS that grows to a 400-person Series B team with GBP 80m of gross assets is still inside the EMI regime - whereas under the old rules they would have aged out at 250 employees or GBP 30m of assets, often during the Series A milestone, and would have had to convert to an unapproved scheme or CSOP at a substantial cost.

For an indie hacker just thinking about a first hire, the practical effect is simpler: you do not need to worry about outgrowing EMI. Start with EMI, stay with EMI for the foreseeable future.

Eligibility: what the company has to be

EMI is one of the cleanest UK tax-favoured schemes - the eligibility test is genuinely straightforward.

The company must be:

1. A UK limited company (or a foreign company with a UK permanent establishment).
2. Independent - not a subsidiary of another company that controls more than 50%.
3. Carrying on a "qualifying trade" - excluded activities are similar to SEIS: legal, accountancy, financial services, property, leasing. Plain SaaS is fine. SaaS-plus-consultancy where the consultancy is more than 20% of revenue is in the grey zone.
4. Under the new April 2026 limits: 500 employees, GBP 120m gross assets, GBP 6m total option pool.

For a UK indie SaaS founder, you almost certainly already qualify on every count. The only gotcha is the qualifying-trade test if you have heavy services revenue.

Eligibility: what the employee has to be

EMI is for employees - not contractors, not advisers, not your accountant. The specific tests:

1. Working time - the employee must spend at least 25 hours per week working for the company, or at least 75% of their total working time. For a first hire who joins as a full-time employee, this is automatic. For a part-time hire (eg. 3 days a week, GBP 30k pro-rata), you need to confirm they are not also working 4 days a week somewhere else.
2. Existing shareholding - the employee cannot already hold (with associates) more than 30% of the company before the grant. Co-founder grants therefore do not qualify - they are usually issued as ordinary shares with founder vesting instead.
3. Individual cap - no employee can hold more than GBP 250,000 worth of EMI options measured at grant (Actual Market Value). Above that ceiling, additional options for the same employee fall outside EMI.

For your first hire as a non-founder employee on full-time, the employee tests are almost always met out of the box.

Worked example: the 15k base + 20k EMI grant offer

Let's walk a realistic UK indie SaaS first hire offer. The shape:

• Pre-money valuation (most recent SEIS round): GBP 750,000
• First hire role: senior full-stack dev, would normally cost GBP 65,000 cash market rate
• Cash you can afford: GBP 35,000 base
• Cash gap to fill with equity: GBP 30,000 / year of perceived value
• EMI grant size: GBP 20,000 at today's AMV (Actual Market Value)
• Vesting: 4-year cliff-1 (25% after one year, then monthly thereafter)
• Exit horizon assumption: 5 years to a GBP 5m trade exit

The arithmetic at grant:

Line	Detail
AMV per share (HMRC valuation)	GBP 0.075 (assuming 1m shares in issue at GBP 750k pre-money)
Number of options granted	266,666
AMV of grant	GBP 20,000
Strike price	GBP 0.075 (set at AMV)
Vesting	4-year cliff-1

The arithmetic on a successful exit:

If the company exits in five years for GBP 5m and the employee has fully vested:

Line	Amount
Number of shares (at exit, assume no dilution for simplicity)	266,666
Sale price per share at GBP 5m exit on 1m shares	GBP 5.00
Gross sale proceeds	GBP 1,333,330
Strike paid (266,666 × GBP 0.075)	GBP 20,000
Net gain	GBP 1,313,330
BADR on first GBP 1m at 10% CGT	GBP 100,000 tax
20% CGT on remaining GBP 313,330	GBP 62,666 tax
Net to employee	GBP 1,150,664

Compare to unapproved options on the same outcome:

Line	Amount
Same gross gain	GBP 1,313,330
Income tax at 45% (additional rate)	GBP 591,000
Employee NI 2% on income	GBP 26,266
Employer NI 13.8% on income (company cost)	GBP 181,239
Net to employee	GBP 696,064
Net cost to company	additional GBP 181,239

The EMI route saves the employee GBP 454,600 in personal tax and saves the company GBP 181,239 in employer NI on the same exit. On a GBP 1,313,330 gain, EMI is a 35-point net swing in the employee's favour and a clean GBP 181k saving on the company side.

The 92-day HMRC notification rule

This is the most common EMI failure mode and the one that costs companies the relief.

The rule: within 92 days of the date of grant, you must notify HMRC of the EMI option via the online HMRC portal (Employment Related Securities, ERS). Late notification means the option does not qualify for EMI and falls back to unapproved option treatment - which is the 35-point swing in the wrong direction.

The penalty for late notification is GBP 100 per day past the deadline (capped at GBP 9,000), but the worse cost is the lost EMI status itself.

Practical tactic: set a calendar reminder for 60 days post grant. Most setup-shop accountants build the 92-day notification into their EMI scheme service. If you handle it yourself, the HMRC portal task is a 20-minute job - you upload the option grant details, the strike price, the vesting schedule, and the AMV.

The HMRC valuation - AMV vs UMV

The strike price for an EMI option must be at least the Actual Market Value (AMV) at grant, agreed with HMRC in advance via a Form VAL231 application.

For a UK SaaS at pre-seed stage, the AMV is typically derived from the most recent funding round's pre-money valuation. If you raised GBP 75k SEIS at a GBP 750k pre-money valuation 2 months ago, HMRC will usually agree GBP 750k as the AMV for a grant today. AMV typically takes 3-6 weeks to agree with HMRC via the Shares and Assets Valuation team.

There is also an Unrestricted Market Value (UMV) - the share value as if there were no restrictions. UMV is usually higher than AMV because EMI shares have transfer restrictions, drag-along clauses, and other rights that reduce their tradeable value. The difference matters for the GBP 250k individual cap - which is measured at AMV - so a higher UMV does not eat into your cap. Practical effect: more options can fit under the GBP 250k cap than the headline price suggests.

Setup: the GBP 800-1,500 first-time cost

The minimum viable EMI setup is four artefacts:

1. Articles of association amendment - to permit a new share class for option exercise. Most off-the-shelf Companies House articles need updating. SeedLegals templates handle this.
2. EMI scheme rules - the document that defines the option pool, vesting schedule, exercise mechanics, leaver provisions. Standard templates exist.
3. HMRC valuation (Form VAL231) - the AMV agreement with the Shares and Assets Valuation team.
4. Option grant agreement - the per-employee document that grants the specific option, signed by company and employee.

A first-time setup with a SeedLegals or similar service runs GBP 800-1,500 all-in. A startup-savvy lawyer for a bespoke setup is GBP 2,500-5,000. Beyond the first grant, additional grants under the same scheme are GBP 100-300 each.

For a side-hustle founder this is the only round of paperwork that genuinely requires a lawyer or specialist service. Doing it wrong on the first grant - bad articles, missing 92-day notification, valuation set at UMV instead of AMV - usually means the EMI status fails for that grant, and rectification is more expensive than a clean setup would have been.

What goes wrong - the four disqualifying events

Beyond late notification, four other patterns cause EMI grants to lose their relief:

1. Working-time fall - the employee drops below 25 hours per week or 75% of working time. EMI status freezes at that date and any vesting after that point falls outside EMI. Practical impact for indie SaaS: a hire who goes 4 days a week to handle childcare loses EMI-eligibility for any new vesting unless they are still over the 75% test on their reduced schedule.
2. Leaver event - the employee leaves the company. Most EMI schemes have a 90-day window from the leave date to exercise vested options, after which they lapse. Bad-leaver provisions can reduce the window further.
3. Disqualifying company event - the company's gross assets cross GBP 120m (post-Apr 2026), headcount crosses 500, or the trade shifts to an excluded activity. Existing options keep their EMI status; new grants fall outside.
4. Restructure / acquisition - certain corporate transactions (eg. a share-for-share exchange in an acquisition) can disqualify an EMI option unless rolled over. The standard fix is to have the acquirer issue replacement options on equivalent terms.

For an indie SaaS pre-seed to Series A, only the first two are likely to bite in the early years. Both are managed by clear scheme rules and a calendar.

How to use EMI in the offer letter

The mechanics are clear; the negotiation is the hard part. A practical offer letter pattern for a UK SaaS first hire:

"Base salary: GBP 35,000.

Equity: an EMI option grant of 266,666 ordinary shares, exercisable at GBP 0.075 per share (AMV at grant). Vesting: 25% on the one-year anniversary of your start date, then monthly thereafter to 100% over four years. The grant is subject to formal HMRC notification within 92 days of grant, the EMI scheme rules, and the option grant agreement.

The grant value at today's company valuation is approximately GBP 20,000. On a successful exit at GBP 5m the indicative net value of fully-vested shares (after Business Asset Disposal Relief at 10% on the first GBP 1m of gain) is approximately GBP 1.15m."

Numbers are concrete. The mechanism is explained. The tax outcome is illustrated. The hire walks away knowing exactly what they have been offered and what it could be worth.

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