Budget: Rachel Reeves told to make ‘simple fix’ to ‘badly outdated’ shares scheme
Chancellor Rachel Reeves has been told to make “simple fixes” in the Budget this week to hand hundreds of millions of pounds in tax incentives to small businesses.
It was first reported last month that proposals had been drawn up to lift the cap on Enterprise Management Incentives (EMIs).
The scheme allows smaller businesses to offer share options to their employees with no income tax or National Insurance liabilities.
Speaking ahead of the Budget on 26 November, the chief executive and co-founder of car marketplace tech giant Motorway Tom Leathes said if Reeves followed through with the proposal it would “be a massive boost for UK tech”.
The cap for the EMI share options currently sits at £250,000 over a three-year period.
It is applicable to companies which have assets of £30m or less, as well as fewer than 250 employees.
According to official figures, the scheme cost the exchequer £670m in 2022-23.
Tom Leathes described the EMI share options scheme as “one of our best tools for attracting talent to high-growth companies”.
CEO issues Budget plea to Rachel Reeves
Leathes said: “There are growing rumours the Budget will include reforms to the UK’s EMI share scheme – if true, this would be a massive boost for UK tech.
“The EMI scheme lets startups offer employees share options with favourable tax treatment – it’s one of our best tools for attracting talent to high-growth companies.
“But the scheme is badly outdated: the 10-year expiry encourages founders to exit early rather than build for the long-term, and the 250-employee cap kicks in exactly when you’re trying to hire experienced operators who know how to scale.
“These are simple fixes that won’t cost the treasury much, but the impact on our ability to build world-class tech companies in the UK will be huge.”