Introduction
The Enterprise Management Incentive (EMI) is a UK government-approved share option scheme offering significant tax advantages for both companies and employees. EMI allows companies to grant up to £3 million worth of share options with favourable tax treatment.
This article explains what EMI schemes are, how to set them up in Ledgy, and how to generate EMI notification templates for HMRC reporting.
Relevant guides available:
Who can use EMI schemes: UK companies with gross assets of £30 million or less may offer EMI schemes to eligible employees.
What is the EMI scheme?
The EMI scheme is one of the UK's most attractive employee share option schemes because of its tax benefits and flexibility.
Key features of EMI
Company limit: Up to £3 million of share options can be granted across all employees
Individual limit: Each employee can receive options up to a market value of £250,000
Tax benefits: No Income Tax or National Insurance contributions are charged when EMI options are granted
Eligibility: Available to UK companies with gross assets of £30 million or less
HMRC approval: Companies must notify HMRC when granting EMI options
Tax advantages
The main benefit of EMI options is the favourable tax treatment compared to unapproved share option schemes. Employees pay no Income Tax or NI contributions when options are granted, making EMI one of the most tax-efficient equity compensation methods in the UK.
Setting up EMI in Ledgy
To use EMI features in Ledgy, you need to complete three setup steps: add EMI valuations, create an EMI plan, and store National Insurance Numbers.
Step 1: Add EMI valuations
EMI schemes require regular valuations from HMRC. You need to record these valuations in Ledgy before granting EMI options.
How to add an EMI valuation
Step 1: Go to Ownership > Transactions
Step 2: Click + Add Transaction > Valuation
Step 3: In the modal window, under "Valuation type," select EMI (UK)
Step 4: Enter the valuation details:
AMV (Actual Market Value) - The price per share for this valuation
UMV (Unrestricted Market Value) - The unrestricted price per share
Expiry date - When this valuation expires
HMRC Reference number (optional) - The reference number from HMRC for this valuation
Note: you can also fill in the Optional fields
Step 5: Click Save
For multiple valuations: Repeat these steps to add all your past and current EMI valuations. Having accurate valuation history is essential for HMRC compliance and generating notification templates.
Step 2: Create an EMI plan
You need an EMI plan before you can grant EMI options to employees. You can either create a new EMI plan or convert an existing options plan.
Option A: Create a new EMI plan
Use this method if you're setting up EMI for the first time.
Prerequisites: You must first create a pool from which your EMI plan will draw grants.
Step 1: Go to Equity Plans > Plans
Step 2: Click the "Add plan" button
Step 3: Fill in the plan details:
Plan name - Give your EMI plan a descriptive name (e.g., "EMI Plan 2024")
Pool - Select which pool this plan draws grants from
Date of creation - When the plan was established
Grant type - Select EMI
Step 4: Click Save
Option B: Convert an existing options plan to EMI
Use this method if you already have an options plan that you want to convert to an EMI plan.
Step 1: Go to Equity Plans > Plans
Step 2: Hover over the plan you want to convert
Step 3: Click the Three Dot Menu > Edit initial plan
Step 4: Change the "Grant type" from Options to EMI
Step 5: Click Save
Important: If you haven't added your past EMI valuations yet, you'll see errors indicating that grants don't have valid EMI valuations. Add your EMI valuations first (following Step 1 above) to resolve these errors.
Step 3: Store National Insurance Numbers
To generate EMI notification templates, you need to store each stakeholder's National Insurance Number (NIN) in Ledgy.
How to add National Insurance Numbers
Step 1: Create a custom field for stakeholders called "NIN"
Step 2: Go to the Stakeholders page
Step 3: When creating or editing a stakeholder, click "Custom stakeholder details"
Step 4: Add a custom field with the exact format: "NIN:" followed by the stakeholder's National Insurance Number
Example format:
NIN: AB123456C
Important for bulk editing: When bulk editing stakeholders' NINs, the custom field must be named exactly "NIN" (without the colon) so it can be correctly retrieved on the EMI Reports page. When editing individual stakeholders, include the colon as shown in the example.
Generating EMI Reports
Once you've completed all setup steps (valuations, plan, and NINs), you can generate EMI Reports for HMRC reporting.
Prerequisites checklist
Before generating an EMI notification template, ensure you have:
✅ Added all relevant EMI valuations
✅ Created an EMI plan
✅ Stored National Insurance Numbers for all relevant stakeholders
✅ Granted EMI options to employees
How to generate the template
Step 1: Go to Reporting > Compliance
Step 2: Select the report you wish to create:
EMI notification (EMI1)
EMI annual return (EMI40)
And fill in the relevant details.
The following are step-by-step guides on how to fill each of these EMI reports:
Step 3:
Once you're satisfied with your report, click the Download button in the top right corner.
Click the HMRC submission button in the top right corner to submit the report you have downloaded.
Ledgy's export format and column order match the HMRC template for seamless data transfer.