Today's Budget had plenty for companies utilising share options to attract, retain and incentivise their people. The headline is a significantly enhanced CSOP scheme – which is being renamed "EMI2" with effect from today – with a doubled individual limit, no more interaction with EMI limits, and a longer exercise period. EMI itself also gets some helpful tweaks. The changes to the schemes will take effect from 6 April 2027.
These changes build on the expansion of EMI that took effect in April 2026, when the EMI gross assets limit rose to £120 million, the employee limit to 500, the company option limit to £6 million and the maximum exercise period to 15 years.
The Government's response to its Call for Evidence, also published today, makes clear that the focus this time is on companies that have outgrown EMI or can't use it.
What is changing for CSOP / EMI2?
CSOP schemes are open to companies of any size, including larger businesses and those that don't qualify for EMI. Even so, it has long been regarded as EMI's poor relation, largely because of its lower individual limit. From 6 April 2027:
- The individual limit doubles. The limit on CSOP options an employee can hold will increase from £60,000 (having previously been increased from £30,000 on 6 April 2023) to £120,000.
- The EMI interaction is removed. At present, an employee's unexercised CSOP options count towards their £250,000 EMI individual limit, measured by the market value of the underlying shares at grant. This caps their combined value of tax-advantaged options at £250,000. Once removed, an employee who already holds the full £250,000 of EMI options will also be able to receive up to £120,000 worth of CSOP options, so the combined maximum across the two schemes will be £370,000.
- The maximum exercise period extends to 15 years. At present, the maximum period for exercising CSOP options whilst retaining tax advantages is 10 years. This extension brings CSOP into line with EMI and better reflects the longer growth cycles of many scale-ups. It hasn't yet been confirmed whether, or to what extent, existing CSOP options can be amended to take advantage of the extension.
It appears that the other key features of CSOP will be unaffected. Options must still be granted at market value and, in most cases, held for at least three years before exercise to get the tax advantages. The Government hasn't taken forward suggestions to allow discounted CSOP options or a shorter holding period.
Why the rebranding?
The new name is intended to raise awareness of the scheme and positions EMI2 as the main tax-advantaged share option scheme for companies that have outgrown EMI or don't qualify for it.
Beyond the changes required to reflect the above changes, the underlying CSOP legislation will remain unchanged, and the scheme will retain the CSOP name in legislation. EMI2 is an amended version of the existing CSOP scheme, not an entirely new one.
What is changing for EMI?
There are three EMI-specific changes, again taking effect from 6 April 2027:
- A longer exercise window after a disqualifying event. At present, EMI options must be exercised within 90 days of a disqualifying event (such as the company coming under the control of another company or an employee ceasing to meet the working time requirement) to keep their tax advantages. That window is being extended – but the documents published today aren't consistent on by how much. The Government response refers to 120 days, while the Budget document refers to 180 days. We expect the draft Finance Bill 2026-27 to settle this once published.
- Protection on a move to employee ownership. The Government will make changes so that employees don't lose the tax advantages of their EMI options when their company transitions to an Employee Ownership Trust, and so that companies moving to EOT ownership keep access to EMI. This removes a real obstacle for founders considering an EOT sale.
- Simpler administration. As announced before the Budget, the separate HMRC notification requirement for EMI option grants is being removed for grants on or after 6 April 2027, with such grants instead needing to be reported in the annual EMI end-of-year return.
What does this mean in practice?
Companies that have outgrown EMI, or can't use it
EMI2 should be a much more meaningful tool for senior hires and key employees. A £120,000 limit, with a 15-year life, may now make a CSOP scheme worthwhile where previously a non-tax advantaged option or growth share arrangement may have looked more attractive.
Companies operating EMI
If you're likely to stop qualifying for EMI (for example, because you're approaching the 500 employee or £120 million gross assets limit), EMI2 offers a clearer route forward. Once the interaction is removed, you'll also be able to grant CSOP options on top of a full EMI allocation without that grant counting against the employee's EMI limit – today, a CSOP grant that takes an employee over the combined £250,000 limit can be a disqualifying event for their EMI options.
Timing
The changes don't apply until 6 April 2027. If you're planning CSOP grants above the current £60,000 limit, or which would cause the £250,000 EMI individual limit to be exceeded, you will need to wait until the changes take effect.
In the meantime, we recommend checking whether your existing EMI and CSOP plan rules hard-code any of the current statutory limits: the £60,000 CSOP limit, the 10-year maximum exercise period or the 90-day exercise window following a disqualifying event (as applicable). If they do, the rules may need amending before you can benefit from the new flexibility from 6 April 2027 onwards.
Employee ownership and exits
If an EOT sale is on the horizon, the EMI changes could affect your timetable and how existing options are dealt with, so it's worth factoring them into your planning now.
Other Budget announcements – a new 10% CGT Founders' Relief and the reduction in the Business Asset Disposal Relief (BADR) lifetime limit from £1 million to £500,000, both from 6 April 2027 – may also affect what employees and founders take home on an exit.
The information in this article is correct at the time of publication.
