If you have ever looked at employee share schemes, you have probably come across Enterprise Management Incentives (EMI). They are often regarded as the gold standard for rewarding and retaining staff.

But not every business qualifies for EMI, particularly once it grows beyond certain size limits. That is where the Company Share Option Plan (CSOP) comes in.

In the Budget on 28 October 2026, the Government announced a series of changes designed to make CSOP more attractive. It is even getting a new brand name, “EMI2”, highlighting its role as an alternative or successor to EMI for growing businesses.

So what does this mean in practice?

More shares, more flexibility

The headline change is that the maximum value of shares an employee can hold under a CSOP option will double from £60,000 to £120,000. The increase is expected to take effect from 6th April 2027.

For businesses, this means a bigger opportunity to reward key employees with a stake in the company’s future success.

CSOP and EMI will not share the same limit

At the moment, CSOP options count towards an employee’s separate EMI limit.

The Government plans to remove that connection, meaning employees could potentially benefit from the full allowance available under both schemes. This could be particularly useful for businesses that already offer EMI but want to provide additional incentives for senior staff.

Longer to benefit from options

Currently, employees typically need to exercise CSOP options within 10 years if they want to preserve the scheme’s tax advantages.

The Budget proposals would extend this to 15 years, bringing it into line with EMI. Existing CSOP agreements may also be updated to take advantage of the longer timeframe without losing their tax-favoured status, provided the relevant conditions are met (though at the time of writing, these conditions have not yet been published).

For employees, this provides greater flexibility. For employers, it can make option packages more attractive.

What exactly is CSOP?

In simple terms, a CSOP allows selected employees and full-time directors to buy shares in the company at a price fixed today, usually at market value.

To take full advantage of the scheme, the price payable for shares on the exercise of a CSOP option must not be less than their market value on the grant date. Companies should therefore agree that value with HMRC before granting options.

If the company grows and the share value increases, employees can potentially benefit from that future growth. If the scheme’s requirements are met, it usually offers valuable tax advantages compared with ordinary, non-tax-advantaged share options.

Unlike EMI, CSOP is available to a wider range of companies, making it a useful option for businesses that have grown beyond EMI eligibility.

Who can take part?

CSOP is discretionary. The company decides who receives options.

Generally, employees and full-time directors can participate, but consultants cannot. HMRC interprets “full-time” as meaning at least 25 hours per week, excluding meal breaks.

If the company setting up the scheme is a “close company”, participants cannot qualify if they or their associates have a “material interest” in it, or have had one in the past 12 months. Broadly, this means a 30% interest in the company’s ordinary share capital or assets.

Anyone considering setting up a CSOP should ask their tax adviser to confirm they meet the qualifying requirements.

Why does the tax treatment matter?

One of the main attractions of CSOP is its tax efficiency.

Provided the rules are followed, employees can generally avoid income tax and National Insurance when options are granted and exercised. Instead, any gain is usually taxed under the capital gains tax regime when the shares are eventually sold.

That can make a significant difference compared with ordinary, non-tax-advantaged share options.

What should businesses be thinking about now?

Although the legislation still needs to pass through Parliament, the proposed changes are likely to make CSOP a much more attractive tool for rewarding and retaining staff.

Businesses may want to consider:

• whether future option grants could benefit from the increased £120,000 limit
• whether employees currently restricted by the interaction between EMI and CSOP may be able to receive additional awards
• whether existing option agreements should be updated to allow the longer 15-year exercise period
• whether CSOP could provide a practical alternative where EMI is no longer available.

For many growing companies, these changes could make CSOP, or “EMI2”, a far more compelling way to attract, reward and retain talented people.

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This article is for general information only and does not constitute legal or tax advice. It reflects the position as at November 2026.