EMI2 is the new name for the Company Share Option Plan (CSOP), announced in the Autumn Budget on 28 October 2026. From 6 April 2027 it lets a company of any size grant each employee tax-advantaged options over up to £120,000 of shares, on top of anything they hold under EMI.
Key Takeaways
- The CSOP was rebranded as EMI2 on 28 October 2026, although the legislation still calls it a CSOP.
- From 6 April 2027 the individual limit doubles from £60,000 to £120,000, and new options can be exercised for up to 15 years.
- With the link between the two limits removed, one employee can hold up to £370,000 of tax-advantaged options across EMI and EMI2.
- EMI2 options must be granted at market value and held for three years before exercise to avoid income tax, unless the holder leaves as a good leaver.
- On a £240,000 gain, an additional-rate employee in our example pays £51,120 less tax through EMI2 than through an unapproved option.
- EMI2 shares miss out on the relaxed Business Asset Disposal Relief rules that EMI shares get, so most employees pay 24% when they sell.
Table of contents
1. What changes with EMI2?
The name changed straight away on 28 October 2026, but nothing about how the scheme works changes until 6 April 2027.
HMRC’s employment related securities bulletin 69 confirms the legislation keeps the CSOP name, so plan rules and the annual ERS return will still say CSOP for now.
From 6 April 2027, three changes apply:
- the individual limit rises from £60,000 to £120,000, measured at the market value of the shares at grant
- the maximum exercise period goes from 10 to 15 years for options granted on or after that date
- unexercised CSOP options stop counting towards the £250,000 EMI individual limit
Existing CSOP agreements can be amended to use the 15-year window without losing their tax-advantaged status, as long as the amendment follows the legislation.
Grants made before 6 April 2027 are still capped at £60,000. A company planning a grant round for early 2027 has a reason to wait a few weeks. EMI2 was one of several share-scheme measures in the Autumn Budget 2026.
2. EMI2 vs EMI
EMI is still the better scheme for any company that qualifies.
EMI2 is for companies that don’t, either because:
- they have grown too big or
- because their trade is excluded.
Since 6 April 2026 EMI covers companies with fewer than 500 full-time equivalent employees and gross assets of no more than £120 million, so a scaling games studio or agency usually crosses into EMI2 territory through headcount first.
The main differences, once the April 2027 changes are in force:
| EMI | EMI2 | |
|---|---|---|
| Who can use it | Independent trading companies under 500 employees and £120m gross assets, outside excluded trades | Companies of any size or sector |
| Limit per employee | £250,000 | £120,000 |
| Exercise price | Can be set below market value (income tax on the discount) | At least market value at grant |
| Minimum wait for tax-free exercise | None | Three years, unless a good leaver |
The size tests only apply when options are granted. Passing 500 employees stops new EMI grants, but it doesn’t disqualify the EMI options already in issue.
Our guide to how an EMI scheme works covers the full qualifying conditions.
3. What EMI2 saves an employee: a worked example
On a large gain, EMI2 swaps an income tax charge of up to 45% for capital gains tax at 24%.
Take a hypothetical games studio with 620 staff, too big for EMI.
In May 2027 it grants a senior producer options over 40,000 shares at their £3 market value, which is £120,000 and the full EMI2 limit. Four years later the shares are worth £9, and the producer, an additional-rate taxpayer, exercises and sells on the same day.
- Gain on exercise: 40,000 × (£9 − £3) = £240,000.
- Unapproved option: the whole £240,000 is employment income, taxed at 45% = £108,000.
- EMI2 option held for over three years: no income tax or National Insurance on exercise. The £240,000 is a capital gain instead. After the £3,000 annual exempt amount, £237,000 × 24% = £56,880.
- Difference: £51,120.
The example uses 2026/27 rates and assumes they still apply in 2031. If the shares count as readily convertible assets, the unapproved route also attracts National Insurance through PAYE, which widens the gap.
The relief only works on time: exercise in year two without a qualifying reason and the full £240,000 is taxed as income. Good leavers (injury, disability, redundancy, retirement or a TUPE transfer) can exercise within six months of leaving and keep the relief, as HMRC’s CSOP manual sets out.
4. Using EMI and EMI2 together
From 6 April 2027 an employee can hold £250,000 of EMI options and £120,000 of EMI2 options at the same time, a combined £370,000. Until then, unexercised CSOP options count towards the £250,000 EMI limit, which squeezes how much EMI a company can grant to someone already holding CSOP options.
Two set-ups benefit most. A company still inside EMI can top up a key hire beyond £250,000 with EMI2 options. A company that has outgrown EMI keeps its existing EMI options running and grants new ones under EMI2 without eating into them.
The Budget also changed EMI itself, with effect from 6 April 2027:
- the window to exercise after a disqualifying event doubles from 90 to 180 days, including for existing options where the event happens on or after that date
- the separate grant notification goes, and grants are reported in the EMI annual return instead
- companies arranging to become owned by an employee ownership trust can keep granting EMI options
Some early summaries quoted a 120-day window. HMRC’s bulletin says 180.
5. Tax when employees sell EMI2 shares
Most employees selling EMI2 shares will pay capital gains tax at 24%, because they can’t claim Business Asset Disposal Relief.
EMI shares get a special version of BADR: no 5% shareholding requirement, and the two-year qualifying period runs from the date the option was granted. EMI2 shares get neither. An employee would need 5% of the shares and voting rights for two years, which few option holders reach.
In the worked example, that gap is £237,000 × (24% − 18%) = £14,220 more tax than the same gain on EMI shares, using the 18% BADR rate in force since 6 April 2026.
The Budget also halves the BADR lifetime limit from £1 million to £500,000 for disposals on or after 6 April 2027, so EMI gains above that now pay 24% too. Our Business Asset Disposal Relief guide explains the conditions. The new 10% Founders’ Relief is aimed at founders and early investors, not option-holding employees.
6. Planning share options with WallsMan Creative after the Budget
WallsMan Creative are specialist accountants for the creative industries, working with games studios, agencies, production companies and other creative businesses from offices at Somerset House and in Kingston upon Thames. When a studio grows past the EMI limits, share schemes stop being a set-and-forget job, and that is the stage where we help founders work out what to grant, to whom, and under which scheme.
EMI2 gives larger and excluded companies a second tax-advantaged route worth up to £120,000 per employee, and from April 2027 it sits alongside EMI rather than competing with it. The trade-offs are the market-value price, the three-year wait and weaker relief on exit.
If you’re weighing up a grant round for 2027, or wondering if your existing CSOP should move to the 15-year window, we’re happy to talk it through!
