This website will offer limited functionality in this browser. We only support the recent versions of major browsers like Chrome, Firefox, Safari, and Edge.

Thought Leadership

The EMI term extension: why 15 years matters

Picture of Nigel Watson
By Nigel Watson
5 Mar 2026 7 min read
Passle image

Post-Budget commentary on EMI has (understandably) fixated on the headline numbers: bigger limits, more headroom, more companies in scope. These are welcome changes. 

But the change I think will matter most in practice is the one many are still treating as a footnote, namely: the statutory EMI exercise period moves from 10 to 15 years for options granted on or after 6 April 2026. 

Government materials also confirm that existing, unexercised and unexpired EMI options can be amended to align with the new 15‑year period without losing tax advantages, provided the change is made in accordance with the legislation.

Why this is a structural shift (not just five extra years)

Because it gives companies a materially longer design horizon and removes the artificial expiry cliff edge that has shaped behaviour for over two decades.

And that cliff edge has been distortionary. It has pushed companies into “year‑9 fire drills”, rushed re‑grants and completion‑week patch‑ups that exist not because the business was misaligned, but because the law imposed an arbitrary deadline. The 15‑year runway opens genuine strategic design space for companies that realise value over multiple liquidity moments - refinancings, structured secondaries, staged sell‑downs - not just a single exit.

This is the same conceptual gap I explored in my infrastructure MIPs writing. Long‑duration ownership and intermittent liquidity require incentives that work across multiple value chapters, not a single finale. EMI now moves into that same long-cycle territory.

Who actually benefits (and why that's not mostly PE buyouts)

Two things are true at once:

  • More companies fall within EMI on 6 April 2026 (higher gross‑assets and employee thresholds and a larger company‑wide options limit). 

  • Most majority‑controlled PE buyouts are unlikely to be EMI‑eligible. The EMI regime is built for independent trading companies and mainstream buyout structures usually fail the independence/control tests and size thresholds.

This matters because it reveals the true design logic. EMI is most valuable to (and deliberately aimed at) long‑cycle independent companies - founder‑led groups, scale‑ups that remain private through multiple rounds, and PE‑adjacent situations where control is not held by a corporate parent. These businesses naturally grow and exit over more than a decade. They are where a 15‑year runway actually aligns with reality.

And even in PE‑adjacent deals, pre‑transaction EMI is often live - and its treatment on investment (cash‑out, rollover, replacement or modification) can be a real value and retention flashpoint.

Legislative status: what's final, what isn't, and what you can do now

The 15‑year EMI exercise period sits within the Finance Bill 2025-26, with an operative date of 6 April 2026. Once the Bill receives Royal Assent, the change becomes legally binding, but its effect applies retrospectively to the start of that tax year. Government policy materials have confirmed the intention, though the precise legislative wording is not yet final.

Can companies act early?

Yes, in theory, you can start granting 15‑year options now provided they only lapse after April 2026 - for example by defining the lapse period as “the statutory maximum period from grant permitted under ITEPA 2003 (including any amendment made by the Finance Act 2025-26)”. Ideally though, the disciplined approach is to wait for the final Finance Bill wording, rather than rely on workarounds before the legislation beds in.

If EMI now runs longer, your documentation has to grow up

A long-cycle plan needs a long-cycle operating model:

1) Tranche vesting and multiple exercise windows

A 15‑year runway allows tranche‑based vesting with event‑aligned exercise windows (refinancing, structured secondary, staged sell‑downs) rather than binary “all‑or‑nothing” vest‑and‑exit structures. This reduces expiry-driven behaviour and aligns with multi‑chapter value creation. 

2) Leaver treatment over a decade-plus

With longer horizons come career changes. CEOs become Chairs, founders step back and participants may want to crystallise some value before moving on. Long-cycle EMI needs principled good-leaver frameworks, predictable pro‑rating and coherent treatment of vested vs unvested rights.

3) Execution mechanics that don’t lose value to admin

Even with a 15‑year term, value can be lost without clean mechanics: cashless exercise/sell‑to‑cover on exits, clear valuation information rights and (if pre‑exit exercise is allowed), an internal liquidity pathway that avoids trapping employees in illiquid shares.

Amending EMI options: what you need to know

I would suggest that the move from a 10‑year to a 15‑year EMI exercise period is more than just a template tweak - it’s a governance and design upgrade. It removes the expiry cliff edge that has distorted behaviour for years, but only if companies update the underlying documentation and mechanics, so the longer horizon works cleanly in practice.

New EMI grants from April 2026: build for the long cycle

For EMI options granted on or after 6 April 2026, companies can simply draft plan rules and grant docs with a 15‑year horizon. The real upgrade is structural: transaction‑driven exercise windows (sale, refinance, staged liquidity) can now be built into the rules without being dragged back by the statutory term.

Old EMI options

For existing EMI options that remain unexercised and unexpired, companies may be able to extend the contractual exercise period so it aligns with the new 15‑year statutory window. But this is not a “just update the lapse date” exercise.  

A disciplined extension process should:

  • Confirm the route is permitted under the final enacted legislation (and that the option in question falls within the scope of any statutory mechanism).

  • Ring-fence the change to the term extension (avoid “improvements” that introduce value or change economic outcomes).

  • Avoid re-grant/discount risk: if market value has moved, an ill-judged modification can create unnecessary tax complexity.

  • Obtain required approvals/consents (board and, where required, shareholder/participant consents).

  • Maintain clean documentation: retain pre- and post-variation documentation, update the option register/cap table tool and document any IFRS 2 modification analysis, valuation papers and ERS reporting housekeeping.

Retrospective extension: what we know and what we don't yet know

Government policy materials for the Finance Bill 2025-26 confirm that the maximum EMI exercise period will increase from 10 to 15 years, and that this change can apply retrospectively to existing EMI options, provided the option has not already expired or been exercised. They also confirm that existing EMI contracts may be amended without losing their tax‑advantaged status, so long as the amendment complies with the legislation.

This means that there is, in principle, a legislative route to extend the life of an existing EMI option.

Where things might potentially get a bit more nuanced is when that statutory flexibility meets real‑world EMI drafting, because the contractual language used in most EMI option documents does not mirror the legislative concept of an “exercise period”. Very few EMI options specify a single fixed end‑date for exercise. Instead, they typically rely on post‑vesting exercise windows, exit‑linked exercise rights or short operational exercise periods around expected liquidity events.

The draft legislation does not yet explain how extending these types of lapse provisions should be treated for tax purposes, nor whether doing so risks being treated as modifying a fundamental term of the option - an amendment that, under current EMI principles, could be treated as creating a new option with adverse tax consequences.

In short: there is a route to extension, but it is not a free‑for‑all. Wait for the final legislation, understand how it interacts with your specific EMI drafting and treat extensions as a controlled modification not admin.

Who benefits from a 15-year EMI (in the real world)

Long-cycle private companies

Companies are staying private longer; the old option life was a hard constraint; the new term now aligns better with reality.

Companies with staged liquidity / long-duration infrastructure

Increasingly, value is being realised through multiple events, not one exit; the longer term removes expiry pressure and avoids re‑papering.

Succession journeys (including EOT trajectories)

Founder‑led groups taking a longer succession path often found the 10‑year regime structurally misaligned: too long a window for early‑stage grants to survive intact, too short a window for late‑stage hires to share meaningfully in value creation. A 15‑year term closes that design gap. It gives companies the runway to stage grants when they should be made - when responsibility shifts, when the next cohort steps up - rather than when the statutory timeline forces their hand.

Final thoughts

The 15-year EMI change is valuable precisely because it removes a distortion:;the legal deadline no longer has to drive the commercial strategy. If you treat it as a design and governance upgrade - not a template tweak - it can materially reduce friction, improve retention alignment and lower execution risk when the business hits real liquidity moments.

But to get that benefit, companies need to treat any amendments with care.

Done properly, the 15‑year horizon future‑proofs your EMI for multi‑stage growth, intermittent liquidity and real‑world ownership cycles. Done poorly, it creates re‑grant risk, avoidable tax charges, IFRS volatility and due diligence surprises at exactly the wrong time

At Burges Salmon, we help companies design, operate and future‑proof incentive structures that work in the real world - across multiple liquidity moments, complex ownership cycles and evolving tax and regulatory frameworks. Our approach is deliberately hands‑on: we combine deep technical expertise in EMI, CSOP, growth shares and unapproved plans with a clear understanding of how businesses actually grow, raise capital and transition through change.

 

Related services

Related articles

01
10

See more from Burges Salmon

Want more Burges Salmon content? Add us as a preferred source on Google to your favourites list for content and news you can trust.

Update your preferred sources

Follow us on LinkedIn

Be sure to follow us on LinkedIn and stay up to date with all the latest from Burges Salmon.

Follow us