SearchEMI2: Enterprise Management Incentives 2
EMI2 (formerly CSOP): Tax-Advantaged Share Options for Growing Companies
Updated 28 October 2026 following the Autumn Budget
In the Autumn Budget on 28 October 2026, the government renamed the Company Share Option Plan (CSOP) as Enterprise Management Incentives 2 (EMI2) and announced that it will become significantly more generous from 6 April 2027.
EMI2 is designed for companies that have outgrown EMI or can’t use it, for example because of their size or the sector they’re in. Used alongside EMI, it means key employees will be able to hold up to £370,000 of tax-advantaged share options.
At a glance
| What it is | Tax-advantaged share options. Employees can buy shares in the future at today’s price. |
| Who can use it | Companies of any size and in almost any sector |
| Individual limit | £60,000 now, rising to £120,000 from 6 April 2027 |
| Exercise window | 10 years now, rising to 15 years from 6 April 2027 |
| Tax on exercise | No income tax or NICs if exercised at least three years after grant |
| Interaction with EMI | From 6 April 2027, EMI2 options no longer count towards the £250,000 EMI limit |
| Legislation | Finance Bill 2026-27; the scheme keeps the CSOP name in law |
What’s changing
From 6 April 2027:
- The individual limit doubles from £60,000 to £120,000 of shares under option, valued when the option is granted.
- EMI and EMI2 become independent. At present, CSOP options count towards an employee’s £250,000 EMI limit. From April 2027 they won’t, so an eligible employee can hold the full allowance under both schemes.
- The exercise window extends from 10 to 15 years, in line with EMI.
How EMI2 works
- The company grants an employee an option to buy shares at today’s market value.
- The employee waits at least three years.
- The employee exercises the option. There’s no income tax or NICs on the growth in value since the grant.
- When the shares are sold, any gain is subject to Capital Gains Tax rather than income tax.
EMI or EMI2?
| EMI | EMI2 | |
|---|---|---|
| Company size | Up to £120m gross assets and fewer than 500 employees | No size limit |
| Sectors | Qualifying trades only; excludes, for example, property, financial and some professional services | Almost any sector |
| Individual limit | £250,000 | £120,000 (from April 2027) |
| Company-wide limit | £6m | None |
| Exercise price | Can be set below market value (tax due on the discount) | Must be at least market value |
| Minimum wait before tax-free exercise | None | Three years |
| Exercise window | 15 years | 15 years (from April 2027) |
| BADR on sale | Available on favourable terms | Normal BADR rules apply |
EMI remains the more generous scheme if your company qualifies. EMI2 fills the gap for companies that don’t, and from April 2027 it can also sit on top of EMI for your most important people.
What it could mean for an employee
Take an employee granted EMI2 options over £120,000 of shares. Four years later, the shares are worth £480,000, and they exercise and sell.
- Unapproved options: income tax at 45% on the £360,000 growth = £162,000, plus possible NICs
- EMI2: Capital Gains Tax at 24% on the £360,000 gain = around £86,000, with no income tax or NICs on exercise
That’s a saving of around £76,000 for the employee. There’s also no employer’s NIC to pay on the growth.
Illustration only. It assumes an additional-rate taxpayer, current tax rates, and that the option qualifies and is exercised after the three-year period.
Who should be looking at EMI2?
- Growing companies that have outgrown EMI (more than £120m of gross assets or 500 or more employees)
- Companies in sectors excluded from EMI, such as property, financial services and some professional services
- Companies already using EMI that want to offer more to senior people from April 2027
- Businesses with existing CSOP schemes, which should review grant policies and option terms ahead of the changes
What to do now
- Check which scheme fits. Many companies that couldn’t use EMI before the 2026 expansion now can, and EMI is usually the better option where available.
- Plan your 2027 grants. If you’re granting options to senior employees, think about whether to wait for the £120,000 limit and the removal of the EMI interaction from 6 April 2027.
- Get the valuation right. EMI2 options must be granted at market value, so an agreed valuation protects the tax position.
- Review existing CSOP options, including their exercise periods and how they sit alongside any EMI options.
Frequently asked questions
Is EMI2 a new scheme?
No. It’s CSOP under a new name, with more generous limits from 6 April 2027. The legislation will continue to call it CSOP.
Can an employee have both EMI and EMI2 options?
Yes. From 6 April 2027, an eligible employee can hold up to £250,000 of EMI options and up to £120,000 of EMI2 options, a combined £370,000.
Who can receive EMI2 options?
Employees and full-time directors of the company or a participating group company, provided they don’t have a material interest in the company.
What happens if an employee exercises within three years?
The income tax and NIC exemption won’t normally apply, except in specific circumstances such as leaving due to injury, disability, redundancy or retirement, or a qualifying company takeover. Talk to us before exercising early.
Speak to our tax team
Our share schemes and tax specialists help growing businesses design, value and run EMI and EMI2 schemes to attract, reward and keep the people who drive their growth.
Contact us via imagine@hurst.co.uk or 0161 477 2474
This page reflects announcements made in the Autumn Budget on 28 October 2026. The changes take effect from 6 April 2027, subject to legislation in Finance Bill 2026-27. It isn’t advice for your specific circumstances, so please speak to us before acting.
