Moving from CSOP to EMI: When it does (and doesn’t) make sense

Company Share Option Plans (CSOP) have done the job for years. They motivate and retain employees, they're tax-friendly, and they keep operations ticking along for larger companies that can’t access the Enterprise Management Incentive (EMI).

But the recent budget rewrote the rules with a big tweak to the EMI eligibility criteria.

While EMI schemes have always been known as THE scheme for startups and smaller SMEs, they’re about to become considerably more accessible. 

Which raises an obvious question: Should you switch from CSOP to EMI if you can? Here's how to think through the decision.

EMI changes recapped

Amid the usual smorgasbord of new policy changes brought about by the 2025 Autumn Budget was a nugget of positivity: big changes to the government’s premier equity scheme. 

The changes to EMI from April 2026 will be substantial:

• Employee headcount limit doubles from 250 to 500 full-time equivalent employees

• Gross assets threshold rises from £30 million to £120 million

• Company-wide option pool increases from £3 million to £6 million in unexercised options

• Option lifespan extends from 10 to 15 years (can be applied retrospectively to existing options)

In short, for businesses that previously outgrew EMI (or were otherwise ineligible due to exceeding the assets threshold) the scheme is back on the menu from April 2026.

It will crossover into CSOP – the scheme many larger companies have been using by necessity rather than choice. 

What EMI has over CSOP

The EMI scheme was always designed to be the most generous employee equity scheme available. 

Understanding where it beats CSOP helps clarify whether switching makes sense for newly eligible companies. The advantages fall into four main areas: 

1. Tax treatment

EMI generally performs better from a tax perspective.

It comes down to being able to exercise options (i.e. purchase them) with zero income tax or National Insurance (NI) (assuming all the EMI conditions are met – proper valuation, qualifying company, etc), even if the shares have grown in value. 

Bar good leaver situations and some company events (some exits, M&As), CSOP only gives that treatment if the employee exercises within a narrow 3-to-10-year window (subject to satisfying other conditions, and outside that window the entire gain is taxed as income at up to 45% plus NICs.

Access to Business Asset Disposal Relief (BADR) also differs between the two schemes. Here’s a clear comparison:

2. Option flexibility

For the CSOP, options must be granted at market value or above (no discounts allowed). Whereas EMI options are generally issued at a discounted rate, maximising an employee's potential gains.

CSOP's three-year rule restricts early exercise, though there are some exceptions.

For EMI, there is no statutory minimum exercise period; employees can exercise as soon as their options vest, subject to scheme rules*.

Though the options must be exercised within 10 years of the grant date (15 years from April 2026), otherwise the tax benefits expire. And to claim BADR, they must hold the shares for at least 24 months before selling.

EMI also gives companies more control over leaver treatment, whereas CSOP's good leaver rules are statutory and restrictive.

*For example, if you design an exit-only scheme, employees will still have to wait for an exit to exercise any vested options. 

3. Maximum option value

CSOP limits individuals to £60,000 in total unexercised options, compared to £250,000 for EMI. 

For senior hires expecting meaningful equity stakes, £60,000 worth of shares at current valuation often isn't enough. The new £6 million company-wide EMI limit coming in (up from £3 million) provides considerably more headroom than CSOP's individual cap.

4. Perception

The EMI has a brilliant reputation, being flexible and tax-efficient. The CSOP is less well-known outside of larger companies and is often seen as the backup when EMI isn't available. 

That perception may not be entirely fair to the CSOP, which still offers evident benefits over unapproved options, but it can still influence hiring decisions.

What CSOP offers that EMI doesn't

There’s no bias here. CSOP gets positioned as the fallback scheme, but it retains some genuine advantages.

First, companies in excluded sectors for the EMI, or those that sit above even the new thresholds, CSOP is effectively the only tax-advantaged discretionary option scheme available. It can also be a better structural fit for international groups with UK operations. 

Here’s why:

1. No sector restrictions

EMI excludes certain activities, including banking, insurance, money lending, property development, legal and accountancy services, leasing, and receiving royalties or licence fees as a substantial part of the business.

CSOP has no excluded trades, so it can be used in sectors where EMI is not available.

2. No company size limits

EMI remains limited by assets, headcount and an overall £6 million cap on unexercised options from April 2026. CSOP has no company size or company-wide option limits, and can be used by larger and listed groups (although there is still a £60,000 per-person CSOP limit).

3. Works for subsidiaries of listed parents

EMI requires the option company to be independent and not controlled by another company, which often rules out UK subsidiaries of overseas groups.

CSOP can be used where the parent company is listed on a recognised stock exchange, making it suitable for many US or European groups with UK operations.

4. Works for listed companies

EMI is aimed at independent, private companies, so most listed companies will not meet its size and other conditions. CSOP, by contrast, is commonly used by listed companies as their main tax-advantaged option plan.

Ultimately, for companies that can’t use EMI at all, CSOP remains the best option, and we support it alongside the EMI here at Vestd. 

When switching makes sense

So what might tip the balance to the EMI if you’re one of the 1,800+ companies that might be newly eligible or might be soon?

The case for switching to EMI is strongest when:

• Key employees have maxed out their £60,000 CSOP limits and need refreshes.

• You're nearing exit and BADR's tax savings become material. 

• CSOP's three-year minimum is restricting how you structure vesting.

• You're competing for senior hires who expect the more tax-efficient scheme.

• If you don’t have any share scheme at all yet as a scaling company, EMI now offers more runway before you’ll have to switch.

And when it may not...

The case for sticking with CSOP is strongest when:

• You have significant international teams and EMI would only cover UK staff.

• You operate in excluded sectors (banking, property, legal services, accountancy).

• You're close to exit and the disruption isn't worth it.

• Existing CSOP grants are substantial and migrating them has tax implications.

If you're newly eligible and neither situation obviously applies, running both schemes in parallel can be the answer – keep existing CSOP grants, issue EMI going forward.

Running CSOP and EMI in parallel

The answer may be to run both schemes simultaneously. This pragmatic middle ground offers the benefits of EMI for new grants without the pain and risk of trying to migrate existing CSOP options. 

Here's how this typically works in practice:

• Keep existing CSOP options as they are: Let CSOP vest and be exercised under the original terms. 

• Grant EMI to new hires and for refreshes from April 2026: New employees get EMI from day one, while existing employees can receive EMI for any new grants going forward.

• Communicate clearly to employees: People need to understand that they might have options under two different schemes, and how each one works. This is particularly important for employees who’ll receive both CSOP and EMI options.

Over time, as CSOP options vest and are exercised, the CSOP scheme will wind down naturally, and the company will be fully on EMI. 

Cancelling and regranting options

Alternatively, you and the recipients can mutually agree to cancel the CSOP options. In return for this, the company agrees to offer EMI options.

This should be considered carefully to make sure the anticipated outcome is still beneficial for the recipient, given the company’s future plans, the relative exercise prices, the valuation, and the expected length of time until the options will be exercised.

If you’re thinking of going down this route, it’s best to speak with a specialist first (here to help!). 

Final thoughts

The EMI expansion is excellent news with little downside for many. The expanded thresholds mean you can finally offer the equity structure that's been helping smaller companies win talent for years. 

Whether you switch fully, run both schemes in parallel, or stick with CSOP depends entirely on your specific situation. International workforces, sector restrictions, exit timing, and the structure of your existing grants all play a role.

The key is making an active decision, preparing, and building workflows to smooth everything out on the compliance side. 

If you’re eyeing up the EMI given the new thresholds, let’s talk. Book a free chat today. 

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Our team, content and app can help you make informed decisions. However, any guidance and support should not be considered as 'legal, tax or financial advice.'