Introduction – Why EMI & BADR Matter More Than Ever in 2025
In today’s competitive business environment, attracting and retaining the right talent can be as critical as securing funding. For founders, directors, and high-growth companies in London, Enterprise Management Incentive (EMI) stock options remain one of the most powerful tools for rewarding key employees while maintaining cash flow.
But in April 2025, Business Asset Disposal Relief (BADR) underwent significant changes — with the previous 10% capital gains tax rate being replaced by 14% for gains within the £1m lifetime limit and 18% for gains above it. This shift alters the post-exit landscape for founders and employees alike.
CIGMA Accounting, a chartered accountancy firm in London specialising in strategic tax advisory, works with business owners, high-net-worth individuals, and scale-ups to design EMI schemes that not only comply with HMRC but also maximise tax efficiency under the new BADR rules.
What Are EMI Stock Options?
Enterprise Management Incentives are a government-approved share option scheme designed for small to medium-sized companies. The primary aim: to help businesses compete for top talent without matching the high salaries of larger corporates.
HKey Features of EMI Stock Options
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Tax-efficient for both the employer and employee
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Options granted at market value (or with agreed discounts)
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No Income Tax or NICs when options are granted
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Capital Gains Tax (CGT) applies to the sale of shares, often at favourable rates.
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Employees can benefit from BADR if the qualifying conditions are met
EMI & BADR: How They Work Together
One of the most attractive aspects of EMI stock options is the potential to qualify for BADR on the eventual sale of shares. Prior to April 2025, qualifying gains were taxed at 10% up to a lifetime limit of £1m. Under the new regime, this rises to 14% up to the limit, with gains above taxed at 18%.
This still represents a substantial saving compared to the main CGT rates of 20% for higher-rate taxpayers.
The 2025 BADR Changes at a Glance
Old vs New Rates
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Before April 2025: 10% CGT on qualifying gains up to £1m lifetime
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From April 2025: 14% CGT on qualifying gains up to £1m lifetime, 18% above this
Who is Affected?
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Founders selling part or all of their stake
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EMI option holders exercising and selling shares
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High-net-worth investors planning exits
Why EMI Remains a Game-Changer Despite BADR Changes
Even with the higher BADR rates, EMI schemes remain one of the most tax-efficient remuneration tools for growth companies. The ability to align employees with the company’s long-term success, without significant cash outflow, is a competitive advantage in London’s startup and scale-up market.
As a tax advisor for city professionals and an accountant for startups, CIGMA has seen EMI-equipped companies secure top-tier hires, close funding rounds faster, and improve retention rates dramatically.
EMI Qualifying Conditions (2025 Update)
To qualify for EMI status, both the company and the option holder must meet specific HMRC criteria:
Company Conditions
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Gross assets must not exceed £30 million
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Fewer than 250 full-time employees
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Must carry out a qualifying trade (certain sectors excluded)
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Permanent establishment in the UK
Individual Conditions
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Employee must work at least 25 hours per week or 75% of working time in the business
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Cannot hold more than 30% of the company’s share capital
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Options must be exercisable within 10 years
EMI Tax Advantages Explained
For the Company
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Corporation Tax relief on the difference between the market value at exercise and the option price
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No employer NIC on grant or exercise (if qualifying)
For the Employee
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No Income Tax or NIC at the grant
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CGT on sale (14%/18% with BADR, 20% otherwise)
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Ability to agree a market value with HMRC in advance to fix tax position
BADR Qualification for EMI Shares
For EMI options, the usual two-year shareholding period for BADR is modified — the clock starts ticking from the date of option grant, not exercise. This makes EMI particularly attractive for companies planning a medium-term exit.
Example:
If you grant EMI options today and sell the business in 18 months, BADR could still apply because the qualifying period started at grant.
Strategic EMI Planning in the New BADR Environment
With rates increasing, the focus shifts from “Do I qualify?” to “How do I optimise my taxable gain?”.
Tactics for Founders and Directors
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Valuation management – secure HMRC agreement at a reasonable market value before grant
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Exercise timing – align with funding rounds or exit windows
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BADR lifetime limit planning – spread disposals over tax years where possible
EMI for High-Net-Worth Individuals & Key Executives
CIGMA works extensively with high-net-worth tax advisor London clients, particularly in finance, legal, and tech sectors. EMI can form part of a broader legacy planning accountant strategy — integrating with dividend tax planning, CGT mitigation, and international tax considerations.
The CIGMA Approach to EMI Scheme Design
Our process is tailored and discreet, combining bespoke accounting firm expertise with strategic tax advisory London insights:
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Feasibility Review – Assess EMI qualification and alignment with business goals
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Valuation Agreement – Negotiate and agree value with HMRC Shares & Assets Valuation
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Scheme Design – Draft option agreements and performance conditions
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Ongoing Compliance – Annual HMRC notifications, option register maintenance
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Exit Advisory – Structuring disposals for maximum tax efficiency
Case Study: EMI & BADR in Action
A fintech founder in Farringdon granted EMI options to six senior hires in 2020 at a £1 share value. In 2025, the company sells for £20 per share. Employees exercise and sell on the same day.
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Gain per share: £19
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Total gain per employee: £190,000
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CGT at 14%: £26,600 (vs 20% = £38,000)
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Saving: £11,400 per employee
Multiply this across a team, and the savings can exceed £60,000 while keeping talent engaged throughout the growth journey.
Common EMI & BADR Pitfalls to Avoid
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Missing the 92-day HMRC notification deadline after grant
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Letting the EMI valuation lapse before grant
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Breaching working time requirements for employees
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Not monitoring the £1m BADR lifetime limit across all disposals
Conclusion – Position Your Business for a Tax-Efficient Future
The changes to BADR rates in 2025 are significant, but for many London companies, EMI stock options remain the gold standard for attracting, rewarding, and retaining high-calibre talent.
With the right accountant for startups, corporate tax advisor London, and strategic EMI design, your business can still achieve substantial tax savings and competitive advantage.
CIGMA Accounting specialises in executive tax services, exclusive accountant for HNW clients, and scale-up tax advisory. Book your EMI scheme review today and ensure your growth strategy is as tax-efficient as possible.
