At Autumn Budget 2026, it was announced that the Company Share Option Plan (CSOP) would be rebranded as Enterprise Management Incentives 2 (EMI2), along with enhancements to make the scheme more attractive to growing businesses. The changes take affect from 6 April 2027 and will give businesses greater flexibility to use EMI2 alongside the original EMI scheme, or as a follow-on scheme as they grow.  

CSOP rebranded: What is changing under EMI2? 

EMI2 is not an entirely new share option regime. Instead, it builds on the existing Company Share Option Plan (CSOP) and rebrands it as Enterprise Management Incentives 2 (EMI2). 

The government intends it to complement the original EMI scheme and provide a follow-on option for companies that have grown beyond the EMI limits. 

From 6 April 2027, three key changes will make the existing CSOP regime more flexible: 

• The individual limit will double from £60,000 to £120,000. 

• The EMI and EMI2 limits will operate independently, meaning an employee could hold options over shares worth £250,000 under EMI while also being able to receive their full £120,000 EMI2 allowance.  

• The maximum exercise period will increase from 10 to 15 years, giving businesses greater flexibility over when options can be exercised. 

These changes should make EMI2 more relevant to companies that may previously have considered the £60,000 CSOP limit too restrictive to provide a meaningful incentive to key employees. 

How does EMI2 differ from EMI? 

Despite the name, EMI2 should not be viewed simply as a replacement or larger version of the existing EMI scheme.  

EMI remains targeted at qualifying smaller and medium-sized trading companies, with its scope was significantly widened from April 2026. The changes included: 

• Gross asset limit: increased from £30 million to £120 million 

• Employee limit: increased from 250 to 500 employees 

• Company option limit: increased from £3 million to £6 million 

• Maximum option period: increased from 10 to 15 years 

Where available, EMI is still likely to be an attractive starting point where the company and employee qualify, with an individual option limit of up to £250,000. You can find out more about the EMI changes introduced in April 2026 here.

EMI2 is available much more widely, including to companies that are too large for EMI or whose activities do not meet the EMI qualifying trade requirements. This makes it particularly relevant to businesses that have grown beyond EMI eligibility, as well as companies that have never been able to access EMI. 

Should businesses utilise EMI or EMI2, or both? 

Perhaps the most interesting part of the changes is that businesses will not always need to choose between EMI and EMI2. 

From April 2027, an EMI-qualifying company could grant an employee £250,000 of EMI options and a further £120,000 of EMI2 options. For businesses looking to provide a larger equity incentive to key employees, particularly senior hires, the ability to combine the schemes could therefore be valuable. 

EMI2 can also provide another option as businesses grow. A company might initially grant EMI options while it meets the relevant eligibility conditions, before using EMI2 for future awards once it grows beyond those limits. The government's intention is therefore for the schemes to provide a more joined-up incentive framework through different stages of a company's growth. 

While the increased limits provide greater flexibility, businesses will not necessarily want to maximise them. The right approach will depend on the company’s circumstances and what it is looking to achieve, including whether EMI, EMI2, a combination of the two, or other forms of equity incentive such as growth shares would be more appropriate. 

What is the tax treatment of EMI2? 

As with the existing CSOP scheme, EMI2 will remain a tax-advantaged share option arrangement.  

Where the relevant conditions are satisfied, employees can generally exercise qualifying options without an Income Tax or National Insurance Contributions charge arising on the increase in value of the shares between grant and exercise. Instead, any increase in value following acquisition will generally fall within the Capital Gains Tax regime when the shares are ultimately sold. 

Unlike EMI, however, EMI2 does not benefit from the special Business Asset Disposal Relief (BADR) rules available for qualifying EMI shares. Employees acquiring shares through EMI2 would need to meet the normal BADR conditions for the relief to apply. Qualifying EMI shares can access BADR without meeting the usual 5% personal company requirement. Given recent changes to BADR this difference is of far less significance than it was. 

Considerations for businesses going forward 

With the changes coming into effect from 6 April 2027, businesses should consider what EMI2 could mean for their existing or future share plans. 

For companies already using EMI, there may be scope to use EMI2 alongside it, particularly where larger awards are needed for key employees. For businesses approaching the EMI eligibility limits, EMI2 could also provide a natural next step for future option grants as the company grows. 

Companies already operating a CSOP should also review their existing arrangements ahead of April 2027, including whether existing option agreements could benefit from the longer 15-year exercise period and how the increased £120,000 limit could be used for future growth. 

The changes may also make EMI2 more attractive to businesses that do not qualify for EMI, or that previously found the £60,000 CSOP limit too restrictive. 

If you need assistance or further information on EMI or EMI2, our Employee Incentives and Valuations teams can help with the options available and how they could apply to your business.