When is the best time to create an EMI share option scheme?

📘 Overview

There’s no single “perfect” time to set up an Enterprise Management Incentive (EMI) share option scheme, but timing can make a big difference to how valuable the options become for your team.

In most cases, the earlier you establish your scheme, the better the long-term rewards for employees, though it’s also important to balance timing with practical factors such as company maturity, cost, and HMRC valuation.

🚀 Why Earlier Is Often Better

Setting up an EMI scheme as early as possible, ideally before your company has built up significant value, can produce the best results for employees.

Here’s why:

• Lower valuation = higher potential upside

  When your company’s shares are valued at a lower price, employees can be granted options linked to that lower valuation. As the company grows and the share price increases, the gain they realise on exercise will be much greater.

• More motivational impact

  Early-stage EMI options can act as a powerful incentive for early employees and founders, those who are contributing most during the high-risk, high-growth phase of your business.

For example, options granted when a company’s shares are worth £1 per share will be much more lucrative for employees than options granted later at £10 per share after several successful funding rounds.

⚖️ When It Might Make Sense to Wait

Although setting up early maximises upside for staff, it’s important to ensure your business is ready.

You may wish to wait until your company has been trading for around a year, when:

• The business has demonstrated traction and commercial viability.
• You have clarity on future plans, team structure, and potential exit scenarios.
• The cost of implementation (legal, valuation, and compliance) is justified by the company’s stage of growth.

💡 At Barnes & Scott, we generally recommend setting up an EMI scheme once the company has started to grow, raised initial investment, and is planning to expand its team.

📈 The Role of Valuation Timing

The share valuation at the date of grant directly determines the tax position and potential reward for employees.

A lower valuation means:

• Employees can exercise their options at a lower price.
• The company can justify greater upside when the business increases in value.

Conversely, waiting until after major investment rounds or strong financial results usually leads to a higher HMRC-approved valuation, which may reduce the relative financial benefit of future exercises.

Barnes & Scott helps companies negotiate valuations with HMRC to ensure they are fair, defensible, and as tax-efficient as possible.

💼 Key Takeaways

✅ Set up your EMI scheme early to lock in a lower valuation and maximise employee upside.

✅ Ensure the company has traded for at least a year to demonstrate traction and justify setup costs.

✅ Work with experienced advisers to secure a favourable HMRC valuation and ensure compliance.

🤝 How Barnes & Scott Can Help

We guide founders and finance teams through every stage of EMI scheme planning, from deciding when to set up, to securing HMRC valuation approval and managing annual compliance.

💡 We’ll help you find the right balance between timing, cost, and value, so your scheme works for both your team and your business.