UK Issues New Equity Compensation Guidance

The annual filing deadline for all Employment Related Securities (ERS) schemes is July 6, 2026, a firm date for the 2025-2026 tax year. Companies that fail to submit their returns on time face an automatic £100 penalty, with additional £300 penalties if the return remains outstanding after three and six months. This year's update carries significant changes for the Enterprise Management Incentives (EMI) scheme, a popular tax-advantaged plan for UK startups. From April 2026, the gross asset limit for a qualifying company will quadruple from £30 million to £120 million, and the employee limit will double from 250 to 500, expanding eligibility to a much wider range of growth-stage companies. The total value of unexercised EMI options a company can have on issue is also doubling from £3 million to £6 million. However, the maximum value of EMI options that can be granted to an individual employee remains unchanged at £250,000 over a three-year period. In a move to reduce administrative burdens, HMRC will also simplify reporting for "net settlement" arrangements starting in April 2026. Employers will no longer need to complete two separate lines of information for these transactions, moving to a single-row entry per employee. The bulletin also clarified reporting requirements for short-term business visitors (STBVs) under an EP Appendix 4 arrangement. Companies are no longer required to report non-tax advantaged ERS data for these employees, provided no UK income tax or National Insurance contributions are due. These administrative tweaks to equity reporting align with a broader UK legislative push for greater workplace fairness and pay transparency. Companies with over 250 employees are already required to publish gender pay gap data, and a proposed Employment Rights Bill may mandate formal action plans to address disparities by 2027.