Autumn Budget 2025 – Employee Share Schemes

The government delivered its Autumn Budget on 26 November 2025. This article briefly discusses the likely impact that the Budget may have on employee share schemes.

The main relevant tax changes are:

• Enterprise Management Incentives (EMI) Plans – The government has proposed that from 6 April 2026, legislation will be introduced to increase the following limits relating to the ‘qualifying conditions’ that a company is required to meet in order to grant EMI Options (which are highly tax-advantaged employee share options) to selected eligible employees:
  • The ‘gross assets’ requirement threshold will be increased from £30 million to £120 million.
  • The maximum number of employees requirement limit will be increased from 250 to 500.
  • In addition, the maximum value of shares over which eligible companies may grant EMI options will be increased from £3 million to £6 million.
  • Also, the period during which the option may be exercised and benefit from the favourable EMI tax regime, will be increased from 10 to 15 years; this will apply to options already granted as well as future awards.
• Increase in dividend and saving income tax rates: The government has announced that the rate of income tax on dividends and savings income will increase by two percentage points from 6 April 2026.
• Freezing personal allowance and basic rate limit: The government has further announced that the personal allowance of £12,570 for income tax and national insurance contributions liabilities will continue until 5 April 2031. Similarly, the basic rate limit will also continue until 5 April 2031.
• ISAs: The maximum value of investment in ISAs remains at £20,000. However, from April 2027, individuals under the age of 65 may invest in cash ISA up to a maximum of £12,000.
• Sale of shares to an employee ownership trust no longer free of capital gains tax. Legislation will be introduced in the Finance Bill 2025, effective from 26 November 2025, 50% of the gain on qualifying disposal of shares to the trustees of an employee ownership trust will be subject to capital gains tax in the normal way.

So far as the increases to the EMI limits are concerned, it is welcome news.

It should enable more medium sized independent companies, engaged in qualifying trade(s) to grant EMI Options and therefore recruit and retain talent more efficiently. A gain made on the disposal of shares under a qualifying EMI Option has the potential to be taxed at the lower rate of 18% (or 24%) as opposed to a ‘gain’ made on the exercise of the unapproved option; accordingly, EMI Options are an important tool to attract and motivate talent in a qualifying company’s armoury.

The rise in the rate of dividend and savings tax is not so good news for employees, especially those who receive dividends under a SIP. While it is possible to avoid paying tax on dividends received in respect of SIP shares by reinvesting in shares, the rise in the tax rate would affect the receipt of cash dividends by employees.

Finally, the changes to the cash ISA limit would probably see an increase in the number of employees electing to transfer shares that they acquire under all-employee Sharesave options into an ISA within 90 days of exercise of their options.

For further information please contact JD Ghosh (jd.ghosh@mm-k.com) Stuart James (stuart.james@mm-k.com) or Paul Norris (paul.norris@mm-k.com)in the first instance.

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