CSOP limit doubles to £120,000 as the scheme becomes EMI 2
The company share option plan (CSOP) limit doubles from £60,000 to £120,000 from 6 April 2027, and the scheme is renamed EMI 2, under Budget changes set out on 28 October 2026. The CSOP limit now sits beside a £250,000 Enterprise Management Incentives limit, so one employee can hold £370,000 of tax-advantaged options.
CSOP and EMI 2 in plain English
A share option is a right to buy shares in a company at a price fixed today, usually at some point in the future. If the company grows, the shares become worth more than the fixed price, and the difference is the employee’s gain. Startups use options to reward early staff when they cannot match the salaries of larger employers.
Normally that gain is taxed like pay, which means that an employee could face a large income tax bill on wealth that exists only on paper and cannot easily be sold. Approved schemes exist to avoid that. The company share option plan (CSOP) and Enterprise Management Incentives (EMI) both usually allow options to be exercised with no income tax charge when the scheme conditions are met, so the gain is taxed later as a capital gain when the shares are sold.
Each scheme caps how much one employee can hold. The cap is measured by the market value of the shares on the day the option is granted, not by the number of shares and not by what they are worth later. A limit of £120,000 therefore means options over shares worth £120,000 on the day of the grant, which means that a higher share price allows fewer shares under the same limit.
EMI 2 is the new name for CSOP. The idea does not change: it is the second, smaller scheme that sits beside EMI. What changes is that it can hold twice as much, and it no longer shares a combined cap with EMI.
A worked example of the new limit
Take a hypothetical employee, Priya, who joins a seed-stage startup. The company sets the option price at £2.00 a share, the market value on the day of the grant. Under the old £60,000 CSOP limit, Priya could be granted options over 30,000 shares, which is £60,000 divided by £2.00.
From 6 April 2027 the same grant could cover 60,000 shares, which is £120,000 divided by £2.00. Say the company grows and the shares are later worth £10.00 each. Exercising 60,000 options costs Priya £120,000, and the shares are worth £600,000, a gain of £480,000. Under the old limit, 30,000 shares would have produced a gain of £240,000.
This means that the gain that can sit inside the tax-advantaged scheme doubles, from £240,000 to £480,000 in this example. If the company also qualifies for EMI, Priya could hold EMI options worth up to £250,000 on top, because the combined cap has gone.
Two practical points apply. EMI 2 options must be held for three years before a tax-advantaged exercise, so Priya cannot cash in early. The figures are hypothetical, and the rules depend on legislation that has not yet been published, so the final detail may differ.
What changes when CSOP becomes EMI 2
From 6 April 2027 the individual limit for CSOP options doubles from £60,000 to £120,000, and the scheme takes the name EMI 2. The £250,000 combined limit across the two schemes is removed, so an employee can hold £250,000 of Enterprise Management Incentives (EMI) options and £120,000 of EMI 2 options together, £370,000 in total.
The exercise period for EMI 2 options extends from 10 to 15 years, matching the extension already made for EMI, and can apply retrospectively. Legislation comes through the Finance Bill 2026-27, and the draft text has not been published, so the detail may change.
The CSOP limit caps the market value of the shares under option, so the number of shares it allows depends on the share price. At a hypothetical £2.00 a share, £120,000 covers 60,000 shares rather than 30,000, and at £10.00 a share it covers 12,000 rather than 6,000. Across both schemes, £370,000 of options at £2.00 a share is 185,000 shares for one employee.
EMI changes as well. The window after a disqualifying event extends from 90 to 180 days, and the employee ownership trust exception widens to cover companies arranging to become employee-owned. The separate notification of options is removed for awards granted on or after 6 April 2027, with notification moving into the annual return.
How Enterprise Management Incentives compare with EMI 2
The two schemes stay different after the rename. EMI allows options to be granted with a discounted exercise price, while EMI 2 does not. EMI 2 options must be held for three years before a tax-advantaged exercise, while EMI has no holding condition.
After an employee leaves, EMI 2 options can be held indefinitely, while EMI options must be exercised within a set period. These differences are unchanged in the announced package, pending the legislation. Save As You Earn and Share Incentive Plan schemes were not changed.
For an option pool, the split means EMI can take discounted grants of up to £250,000 per employee, and EMI 2 can add up to £120,000 on top. Employers that have kept senior staff on EMI alone have £120,000 of extra headroom per person to use from April 2027.
Business Asset Disposal Relief and Founders' Relief overlap
Shares acquired by exercising EMI options qualify for Business Asset Disposal Relief, and shares from CSOP exercise do not. That difference is unchanged for EMI 2, and it carries more weight because the lifetime limit for Business Asset Disposal Relief halves from £1 million to £500,000 for disposals from 6 April 2027.
Founders' Relief, which taxes qualifying gains at 10 per cent up to £10 million, asks for at least 25 per cent of the ordinary share capital, while EMI excludes anyone with a material interest of more than 30 per cent. A founder holding between 25 and 30 per cent can sit inside both tests, and a founder above 30 per cent cannot use EMI at all. A technical consultation on the Founders' Relief criteria closes on 30 November 2026.
The wider package is covered in Budget 2026 for UK startups, the earlier guide to PISCES for employees with EMI options and CSOPs explains the sale route, and every route to selling shares in a UK private company compares the exits.
This is general information, not legal, tax or investment advice. Employers and employees should take advice before relying on announced changes that are not yet law.
Key takeaways
The CSOP individual limit doubles from £60,000 to £120,000 from 6 April 2027, and the scheme is renamed EMI 2.
The £250,000 combined limit is removed, so an employee can hold £250,000 under EMI and £120,000 under EMI 2, £370,000 in total.
EMI 2 options get a 15 year exercise period, and EMI notification moves into the annual return for awards from 6 April 2027.
Only shares from EMI exercise qualify for Business Asset Disposal Relief, whose lifetime limit halves to £500,000 from the same date.
The legislation is part of the Finance Bill 2026-27 and has not been published.
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