11 Mar
2020

Entrepreneur's relief safe for EMI schemes

Entrepreneur's relief is a key benefit of the enterprise management incentive (EMI) share option scheme. It means that when they sell their shares employee option holders will only pay 10% capital gains tax on any profit, so long as they have held their options for over two years (otherwise it's at the normal rate of 20%).

What the Chancellor did today was to reduce the lifetime entrepreneur's relief allowance on gains from £10 million to £1 million; this means that the 10% rate is now available on profits (or 'gains') up to a max of £1 million, potentially saving £100,000 in tax.

For the vast majority of employees who have EMI options the £1 million allowance is more than enough to cover likely gains when their company is sold. So the change is fairly good news for EMI, and it's great that the relief was not abolished altogether as some had feared.