We have published our snap reaction to the Autumn Budget, as well as a deeper dive. In this piece, tax expert Oliver Claridge looks more closely at the specific changes to tax-advantaged employee share schemes.
The Budget 2026 announced that the following changes will take effect for options granted on or after 6 April 2027.
What are CSOPs (now rebranded as EMI2)?
The share scheme formerly known as Company Share Option Plan (CSOP), now to be rebranded as EMI2 (although still referred to in legislation as CSOP), allows (listed or independent) companies of any size to grant tax advantaged share options of up to £60,000 to each or certain employees (there is no requirement to offer to all employees but each employee has their own independent limit). There are no income tax or national insurance charges on qualifying options on grant (assuming exercise price is equal to at least market value as at the date of grant) or their exercise as long as the employee exercises the option within ten years, and:
at least three years have elapsed since the date of grant, or
within six months of cessation of employment as a “good leaver”, or
within 12 months of death (by their personal representatives), or
within six months of certain cash takeovers.
What are EMI Schemes?
EMI allows companies which meet certain very specific criteria to grant up to £250,000 options to employees.
Broadly, to qualify a company must have less than £120m of gross assets, carry on a qualifying trade (and there are a number of exceptions that are not qualifying trades such as property development and financial activities), have fewer than 500 full-time employees and shares must be over the parent company of a group.
As with CSOP/EMI2, there is typically no tax charge on either grant or exercise of the qualifying option.
What is changing from 6 April 2027
The total value of CSOP/EMI2 options is being increased to £120,000 and the ten-year exercise period is extended to 15 years for options granted after April 2027.
Previously, there was in effect an “aggregate” cap on EMI and CSOP/EMI2 grants of £250,000 as EMI had a hard cap of £250,000 and CSOP/EMI2 grants counted towards this figure. The Government will now scrap this interaction, so EMI and CSOP/EMI2 limits can operate independently.
The EMI exercise window following disqualifying events will also be extended to 180 days to give EMI holders more time to take steps to protect their tax advantaged status.
EMI status was previously not lost if the company stopped being independent because it was sold to an employee ownership trust (EOT); the rules now extend to companies arranging to become controlled by an EOT.
Employers will now have more scope to reward and attract highly productive employees in a tax advantaged way and can now take full advantage of both EMI and CSOP/EMI2 schemes. This should provide start-ups and scale ups tax efficient ways to draw in needed talent as they build the next generation of British business.
What the government is intending is that companies first use EMI, then to the extent that they are too large or carry on businesses that don’t qualify they then use CSOP/EMI2. A potential upside is that shares acquired on an exercise of EMI options may benefit from business asset disposal relief (BADR) without needing to satisfy the normal BADR conditions.
Oliver Claridge is a Senior Associate at Forsters and an Adviser to The Entrepreneurs Network.
Forsters has an Autumn Budget 2026 hub, containing analysis and insights. If you would like to learn more, you can find it here. This Policy Update is intended for informational purposes only and does not constitute legal advice. For the most accurate and up-to-date information, please contact Forsters for more.