--- title: Why do I want a low EMI Valuation? description: As part of setting up an EMI Option Scheme, you agree what the value of your company is with HMRC. Sometimes founders get confused by this, because they've just been trying to argue up valuations with --- [Skip to content](https://help.seedlegals.com/en/3095766-why-do-i-want-a-low-emi-valuation#main-content) English Show submenu for translations ![special-case-sl-logo.png\]](https://help.seedlegals.com/hs-fs/hubfs/special-case-sl-logo.png?width=165&height=18&name=special-case-sl-logo.png) - [Blog](https://seedlegals.com/resources/?nr=1) Open main navigation Close main navigation - [Blog](https://seedlegals.com/resources/?nr=1) - English Show submenu for translations - [Home](https://seedlegals.com/) [Home](https://seedlegals.com/) How can we help? - There are no suggestions because the search field is empty. 1. [Help Centre (UK)](https://help.seedlegals.com/en?hsLang=en) 2. [Options and Option Schemes](https://help.seedlegals.com/en/options-and-option-schemes?hsLang=en) 3. [EMI Option Scheme General Knowledge](https://help.seedlegals.com/en/options-and-option-schemes?hsLang=en#emi-option-scheme-general-knowledge) # Why do I want a low EMI Valuation? An EMI valuation is separate from your company's fundraising valuation. While investors may have paid a certain price per share in your last funding round, this doesn't necessarily mean your employees need to pay the same price when exercising their EMI options. By agreeing a lower share valuation with HMRC, you can reduce the **exercise price** (the price employees pay to buy their shares), allowing employees to benefit from more of the company's future growth. Let's look at an example. ### NewCo Ltd – without a lower EMI valuation NewCo recently completed a funding round at a £2 million pre-money valuation, with investors paying **£1 per Ordinary share**. NewCo now wants to grant EMI options to its employees and decides to use the same £1 share price as the exercise price. Two years later, NewCo exits at £3 per share. - **Exercise price:** £1 per share - **Sale price:** £3 per share - **Profit:** £2 per share - **Capital Gains Tax at 18%:** £0.36 per share - **Profit after tax:** £1.64 per share ### NewCo Ltd – with a lower EMI valuation Instead of using the previous funding round price, NewCo submits an EMI valuation to HMRC to agree a lower share value. This can be supported by factors such as restrictions attached to the shares, including reduced voting rights, and other applicable valuation discounts. HMRC agrees to an EMI share valuation of **£0.50 per share**, which NewCo uses as the exercise price. When NewCo exits at £3 per share: - **Exercise price:** £0.50 per share - **Sale price:** £3 per share - **Profit:** £2.50 per share - **Capital Gains Tax at 18%:** £0.45 per share - **Profit after tax:** £2.05 per share ### What's the benefit? By agreeing a lower EMI valuation, the employee pays **50p less per share to exercise their options**, increasing their profit after tax by **41p per share**. Both examples assume the EMI options qualify for tax advantages and the employee is eligible for Business Asset Disposal Relief (BADR), which applies at **18% for qualifying disposals from 6 April 2026**. The examples exclude the annual CGT exemption and other individual tax considerations. ### How can SeedLegals help? SeedLegals has helped thousands of companies prepare EMI valuations, making it easier to agree a defensible share value with HMRC and reward employees through tax-efficient share options. 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