What’s in a name? CSOP share options to be re-branded and expanded

Back in November 2025, the government announced changes to Enterprise Management Incentives (EMI) schemes. The changes, which are now in effect, included relaxing eligibility criteria for companies, as we explain in this article.

A year later – no time at all in the world of employee share plans – the Government has moved on to Company Share Option Plans (or CSOPs). The changes were announced in the Budget on 28 October, and are due to come into effect from April 2027.

This article explains the changes, and the benefits that they bring for businesses who look to use these schemes.

What is the current position?

When tax-advantaged options (being contractual rights to acquire shares) are granted, UK resident employees do not pay Income Tax or National Insurance Contributions (NICs). Provided the relevant statutory conditions are satisfied, neither do they pay either of those taxes when they exercise the options to acquire the shares. However, when the employee sells the shares this is subject to Capital Gains Tax, based on the difference between the sale price and what was originally paid to acquire the shares.

The implications of this are different for EMI schemes and CSOPs.

EMI schemes

These are considered one of the most effective tax-advantaged schemes. EMI options can be granted with an exercise price set at a discount to the market value of the shares at grant date of the option; the discount is subject to Income Tax (and potentially NICs) on exercise.

EMI schemes can only be used by companies below a certain size, measured both by assets and by headcount. So, although those limits were recently raised (as explained in the article linked above) EMI schemes are unavailable to larger companies.

CSOP schemes

Once a company outgrows an EMI scheme, a CSOP is often their next-best option for a statutory tax-advantaged share plan. CSOPs have no maximum size thresholds, either for assets or number of employees. However, there is an individual option limit, which for the last few years has been £60,000.

There are two other important differences from EMI options:

CSOPs cannot be granted with an exercise price lower than market value of the shares at grant
Ordinarily, they can only benefit from tax relief where they are exercised after 3 years

What are the new proposals for CSOP schemes?

An increase in the individual limit: The per-individual limit for options under the CSOP will be doubled to £120,000. What’s more, when granting EMI options, CSOP options will no longer count towards the EMI limit (or prejudice existing EMI options). This increases the maximum value that can be held across both plans from £250,000 to £370,000. Where employees are already at the EMI limit, businesses might want to consider a new CSOP.
Increase in the exercise period: The period in which the options under a CSOP can be exercised will increase from 10 to 15 years. This mirrors the recent change to EMI schemes.
Rebrand: CSOPs will become known as Enterprise Management Incentives 2 (EMI 2), which will help establish it as the sequel to EMI.

When do these take effect?

The proposals should take effect from April 2027.

What does this mean for businesses?

Before announcing the changes, the government ran a Call For Evidence. Much of the feedback that it received concerned the ‘cliff edge’ for businesses once they outgrow the criteria for EMIs. This made it harder for fast-growing businesses to retain and attract talent at a point in their development when this was still crucial. Increasing the personal limit increase addresses this and makes these options much more appealing to employees.

We can help

Over the last few years we have seen many changes to tax advantaged employee share plans. You may have an EMI or CSOP scheme in place already, or you may be looking to implement one. Now would be a good time to revaluate your current share incentive arrangements, make sure that they are still fit-for-purpose.

Our specialist Employee Share Incentives team can answer any questions and advise you on what is best suited to your business and how it can be implemented.

This article was co-authored by Trainee Saul Sorooshian.

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