The Autumn 2026 Budget renamed CSOP and stopped it eating into employees' EMI limits.
The short version: EMI2 is the new name for the Company Share Option Plan (CSOP). From 6 April 2027, the EMI2 individual limit doubles to £120,000, options can be exercised over 15 years instead of 10, and EMI2 options no longer eat into the £250,000 Enterprise Management Incentive (EMI) limit. So one employee could hold up to £370,000 of tax-advantaged options across both schemes.
Below, we compare EMI and EMI2 (CSOP) and look at how to work out which one (or which combination) might suit your team.
Yes. EMI2 is simply the new public-facing name for the Company Share Option Plan, and the legislation will keep calling it CSOP.
The new name has been in use since Budget day, 28 October 2026. The rule changes behind it arrive on 6 April 2027.
The Government's aim is for CSOP to be seen as EMI's natural next step: a scheme you run alongside EMI, or move onto once you've outgrown it. Which, as it happens, is how a growing number of companies already use it.
HMRC's latest figures show the number of companies running EMI and CSOP side by side rose from 120 to 200 in three years, up 66.7%.
Throughout this post, we'll say "EMI2 (CSOP)". Same scheme, two names, and you'll see both for a while yet.
Almost everything lands on 6 April 2027 and applies to options granted from that date. Here's the before and after:
| What's changing | Today | From 6 April 2027 |
| EMI2 (CSOP) individual limit |
£60,000 |
£120,000 |
| EMI2 (CSOP) maximum exercise period | 10 years | 15 years |
| How the EMI and EMI2 limits interact | CSOP options count towards the £250,000 EMI limit | Separate limits: £250,000 EMI plus £120,000 EMI2 |
| EMI exercise window after a disqualifying event | 90 days | 180 days |
| Notifying HMRC of EMI grants | A separate notice for each grant, by 6 July after the tax year | Reported through the EMI annual return instead |
| EMI and Employee Ownership Trusts |
Only companies already controlled by an EOT can grant EMI |
Companies in the process of moving to an EOT keep access to EMI too |
A few details worth knowing:
Existing CSOP options can be amended to use the 15-year exercise period without losing their tax advantages, as long as the amendment follows the rules. HMRC hasn't published the exact conditions yet.
The 180-day window only applies to disqualifying events that happen after 6 April 2027.
Keep notifying HMRC of EMI grants made before 6 April 2027. The old rules still apply to them.
None of this is law (yet!). The Government plans to legislate through Finance Bill 2026–27.
And a quick reminder: EMI already got a big upgrade on 6 April 2026. The company-wide limit doubled to £6 million, the gross assets limit rose to £120 million, the employee limit rose to fewer than 500, and the maximum exercise period went from 10 to 15 years.
EMI and EMI2 (CSOP) are both tax-advantaged option schemes, but they're different wrappers with different rules. Here's how they compare once the April 2027 changes are in.
| EMI | EMI2 (CSOP) | |
| Which companies can use it | Independent trading companies with gross assets up to £120m and fewer than 500 full-time equivalent employees; some trades are excluded. | Companies of any size, with no excluded trades, subject to the scheme's own conditions. |
| Who can receive options | Employees working at least 25 hours a week (or 75% of their working time). | Employees and full-time directors. |
| Individual limit | £250,000 | £120,000 |
| Company-wide limit | £6m of unexercised options | None |
| Exercise price | Can be set below market value (the discount is taxed) | Must be at least market value at grant |
| Minimum wait before exercise | None | Three years, with exceptions for good leavers and certain takeovers |
| Maximum exercise period | 15 years | 15 years |
| Business Asset Disposal Relief (BADR)* | Available on qualifying sales without the usual 5% shareholding | Normal BADR rules apply, so most employees won't qualify |
| Growth shares | Yes | Yes |
| Reporting to HMRC | Annual return (no separate grant notice from April 2027) |
Annual return |
*BADR: The lifetime limit falls from £1 million to £500,000 for disposals from 6 April 2027.
Yes, and from April 2027 it gets a lot more useful. This is the change we're most excited about.
Right now, CSOP options count towards an employee's £250,000 EMI limit. Give someone £60,000 of CSOP options and they can only receive £190,000 of EMI options. The two schemes share one pot.
From 6 April 2027, they get a pot each.
Say Priya is your Head of Product. She already holds EMI options worth £250,000 at grant, the maximum. Today, you've run out of tax-advantaged room for her. Any more equity would have to come through unapproved options, with income tax and National Insurance on the gain.
From April 2027, you could grant Priya another £120,000 of EMI2 options on top. That's:
That's a big deal for companies that granted generously to early leadership and assumed the tax-efficient options had run out.
One caution: the extra room doesn't change existing grants. There's no need to change Priya's existing options, and changing an option agreement can affect its tax treatment. The opportunity is in new EMI2 grants alongside what's already there.
For most SMEs, EMI is still the place to start. EMI2 (CSOP) is what you add, or switch to, as you grow. Here's a quick way to think about it.
You qualify for EMI. EMI is usually the best place to start. It has no minimum wait before exercise and more favourable BADR treatment. See where you stand with our EMI eligibility quiz.
Key people are nearing the £250,000 individual EMI limit. From April 2027, EMI2 could be a way to give them more options without falling back on unapproved options.
You've outgrown EMI. If you have 500 or more full-time equivalent employees, more than £120 million in gross assets, an excluded trade or a parent company in control, EMI2 (CSOP) may be the better fit.
You expect to sell within three years. Think carefully before using EMI2. Its three-year wait means an early exit can trigger income tax unless an exception applies (more on that below).
Your company is already worth a lot. Granting options over growth shares, under either scheme, is worth considering. Because growth shares only capture value above a set hurdle, they're worth less at grant, so more of them fit within the individual limit. Our growth shares calculator shows how.
More and more companies end up using both. Every business is different, though, so it's worth talking all of this through with a specialist or professional adviser.
As Colin Frankland, Equity Consultant at Vestd, puts it: "The changes create some really useful opportunities for businesses, particularly those looking to reward and retain key employees as they grow.
"However, it’s important not to focus solely on the headline option limits when deciding which scheme to use. Factors such as the company’s eligibility, its growth plans, the employees being incentivised and its longer-term exit strategy all need to be considered.
"It’s also worth remembering that implementing a share scheme is only the starting point. Valuations, documentation, employee grants, leavers, exercises and ongoing HMRC reporting all need to be managed properly.
"Having access to experienced specialists and a platform that brings these elements together can make the process considerably simpler as legislation and your own circumstances change."
The new name is EMI2, but the underlying rules are still CSOP's. A few differences didn't change in the Budget, and they matter.
Qualifying EMI option holders can claim Business Asset Disposal Relief without holding the usual 5% of the company. That cuts the capital gains tax rate on qualifying gains from 24% to 18%. EMI2 (CSOP) holders don't get the same perk.
To get the full tax benefits, EMI2 (CSOP) options generally need to be held for three years before they're exercised. EMI has no equivalent rule.
There are exceptions, for example, good leavers and certain takeovers, but they're fiddly and often need the buyer's cooperation. If you're planning to sell soon, seek professional advice first.
The exercise price for EMI2 (CSOP) options must be at least the shares' market value on the day you grant them. Agreeing a valuation with HMRC first helps avoid problems later.
All of this is still at announcement stage. The transitional rules, including exactly how existing options can be amended, will arrive with the legislation. Don't assume an existing option can be extended or converted into EMI2 without consequences.
You don't need to wait until April to start. In fact, it's better if you don't. Here's what we'd look at now.
Check your EMI headroom. How much of the £6 million company limit have you used, and which employees are close to £250,000?
Find the people the old rules held back. Anyone whose CSOP options squeezed their EMI allowance could be eligible for more from April 2027.
Review option expiry dates. Unexercised EMI options can already be extended from 10 to 15 years. CSOP options can follow once HMRC confirms the conditions. Document any change properly.
Look at your leaver and disqualifying-event clauses. If your option agreements say 90 days, they may need updating to make use of the new 180-day window.
Keep notifying HMRC. Grants made before 6 April 2027 still need a separate notification.
Plan EMI2 before you outgrow EMI. If you're heading towards 500 employees or £120 million in gross assets, set up EMI2 (CSOP) before you need it.
Check the scheme still fits the business. A plan designed a few years ago may not reflect your current valuation or exit plans.
Weighing up EMI, EMI2 or both for your team? Our share scheme specialists are happy to talk it through. Book a free consultation and they'll help you figure out what fits.