What is an EMI valuation and how do I get one?
By SuLe · Updated 17 May 2026
An EMI valuation is the market value of your shares agreed with HMRC in advance — historically on form VAL231 — before you grant options. It fixes the figure you set the exercise price at, which is what keeps the option exercisable with no income tax. Agreeing it up front removes the risk of HMRC disputing the value later.
Key facts
- You agree the shares' market value with HMRC in advance, historically using form VAL231.
- The valuation usually sets two figures: actual market value (AMV) and unrestricted market value (UMV).
- Setting the exercise price at the agreed AMV keeps exercise free of income tax.
- An agreed valuation is valid only for a limited window — commonly cited as around 90–120 days; confirm the current period.
- Early-stage AMVs are typically low, which means a low, tax-efficient exercise price for your team.
What is an EMI valuation?
It is HMRC's advance agreement on what your shares are worth for EMI purposes. Rather than guess the value and hope HMRC accepts it after the fact, you propose a figure and HMRC either agrees or negotiates it.
The valuation usually produces two numbers. The actual market value (AMV) reflects the real-world restrictions on the shares — minority stake, no market, investor preferences ahead of them — and is normally what you set the exercise price at. The unrestricted market value (UMV) ignores those restrictions and is used to test the EMI limits.
Once agreed, that AMV is locked in for the grants you make within its validity window.
How do I get an EMI valuation from HMRC?
You submit a valuation to HMRC's Shares and Assets Valuation team, historically on form VAL231, setting out your proposed AMV and UMV and the workings behind them. HMRC reviews it and either agrees your figures or comes back with its own.
The submission needs supporting detail: recent financials, any recent funding, the share class and its rights, and the restrictions justifying a discount. A well-evidenced proposal is agreed faster and closer to your number.
Turnaround varies but can take several weeks, so start before you plan to grant. [More: How do I set up an EMI scheme?]
How long is an EMI valuation valid?
Not indefinitely. An HMRC-agreed EMI valuation holds good only for a limited period — commonly cited as around 90 to 120 days, though you should check the current window on gov.uk before relying on it.
Grant your options while the valuation still stands. If it lapses, or something material changes in the meantime — a funding round, a major contract, a big shift in performance — you generally need to agree a fresh valuation before granting.
That is why founders line up the valuation and the grants together, rather than agreeing a value and sitting on it.
What makes a share worth so little at grant?
Early-stage shares are usually worth far less than the headline valuation of a funding round, and that is legitimate. The option shares are typically a tiny minority stake, in a loss-making company, with no market to sell into, ranking behind investor preference shares on any exit.
Each of those factors supports a discount, so the AMV can be a small fraction of the price investors paid for preference shares. That is good news for your team: a low AMV means a low exercise price, and the more of the future growth falls into the tax-advantaged capital gain.
The valuation still has to be defensible — invented lowball figures invite challenge — which is why HMRC agreement matters. [More: What exercise price should EMI options have?]
Why does the valuation matter for tax?
Because it sets the line between tax-free and taxable exercise. Set the exercise price at or above the agreed AMV, and there is no income tax when the employee exercises. Set it below, and the discount is taxed as employment income at exercise.
The UMV figure does separate work: it is used to measure options against the £250,000 per-employee and £3m company-wide EMI limits.
Get the valuation agreed and the exercise price right, and the whole gain from grant to sale is taxed as a capital gain. Get it wrong and you reintroduce the income-tax charge EMI is designed to avoid.
| Step | What happens | Notes |
|---|---|---|
| Prepare | Gather financials, funding history, share rights | Evidence the discount for AMV |
| Submit | Send valuation to HMRC (VAL231) with proposed AMV/UMV | Start weeks before you grant |
| Agree | HMRC accepts or negotiates the figures | Can take several weeks |
| Grant | Grant options at the agreed AMV | Do it within the validity window |
| Re-agree | Fresh valuation if it lapses or things change | New round, contract or time can trigger it |
Worked example
Olu founds Brightpath, an edtech startup, and wants to grant EMI options to four teachers-turned-product staff. Before granting, he submits a valuation to HMRC proposing an actual market value of £0.30 a share, supported by Brightpath's early-stage accounts and the fact the shares rank behind seed preference shares.
HMRC agrees the £0.30 AMV. Olu grants all four options at a £0.30 exercise price within the validity window, so exercise will carry no income tax, and diarises that the valuation will need refreshing for any grants he makes months later.
When Brightpath raises a priced round soon after, the old £0.30 figure no longer reflects reality, so Olu agrees a fresh valuation before making the next batch of grants.
Where founders go wrong
Granting without an agreed valuation.
Guessing the market value leaves the exercise open to an HMRC challenge years later, once the shares are worth far more.Letting the valuation lapse.
An agreed figure is good only for a limited window — grant inside it or re-agree the value.Reusing a stale figure after a round.
A funding round changes the value; an old valuation used afterwards is unreliable and risks tax on exercise.Setting the exercise price below AMV by accident.
Even a small discount to the agreed AMV creates an income-tax charge at exercise.
Related questions
Do I legally have to get an HMRC valuation for EMI?
No, it is not compulsory, but it is standard practice and strongly advisable. Agreeing the market value with HMRC in advance fixes the figure that keeps exercise tax-free and removes the risk of HMRC challenging the value years later, once the shares have grown. [More: How do I set up an EMI scheme?]
What is the difference between AMV and UMV?
An EMI valuation usually agrees two figures: the actual market value (AMV), which reflects the restrictions on the shares, and the unrestricted market value (UMV), ignoring them. AMV is the price you normally set the exercise price at; UMV is used to test the £250,000 and £3m limits. [More: What exercise price should EMI options have?]
How long does an EMI valuation last?
An HMRC-agreed EMI valuation is valid for a limited window — commonly cited as around 90 to 120 days, though you should confirm the current period on gov.uk. Grant your options while it is still valid; if it lapses, you generally need to agree a fresh valuation before granting. [More: What is an EMI share option scheme?]
Why are early-stage EMI valuations so low?
Because the shares being valued are usually a small minority stake in a loss-making, illiquid company, often ranking behind investor preference shares. That combination justifies a low actual market value — which is good news, as it means a low, tax-efficient exercise price. [More: What exercise price should EMI options have?]
Can I reuse an EMI valuation for a later grant?
Only within its validity window and if nothing material has changed. A new funding round, a big contract or simply the passage of time can make an old valuation unreliable, so later grants usually need a fresh HMRC agreement. [More: When must EMI option grants be notified to HMRC?]
The EMI valuation is the quiet foundation of the whole scheme: agree the wrong figure, let it lapse, or set the exercise price under it, and a tax-free option becomes a taxable one. A SuLe solicitor can prepare a defensible valuation, deal with HMRC, and time your grants to the window. Book a free call about your option scheme and get the number that keeps your options tax-efficient.
Keep reading: What is an EMI share option scheme? · How do I set up an EMI scheme? · What exercise price should EMI options have? · When must EMI option grants be notified to HMRC? · Who is eligible for EMI options? · What is a CSOP and when does it beat EMI?
Primary sources: GOV.UK — Enterprise Management Incentives (EMIs)
