EMI2: Share Option Limit Doubled To £120,000 For Growing
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EMI2: The Share Option Limit Doubles to £120,000 from 6 April 2027. Should You Grant Before Then or Wait?
EMI2 is the new name for the Company Share Option Plan (CSOP). From 6 April 2027, each employee can hold EMI2 options over shares worth up to £120,000 at the date of grant, double the £60,000 limit that applies throughout the 2026/27 tax year. EMI2 options will also stop counting against the separate £250,000 Enterprise Management Incentives (EMI) limit.
This guide is for directors and owners deciding what to offer key people over the next few months. For most companies the question is timing. Options granted between 28 October 2026 and 5 April 2027 are still subject to the old rules, and in some cases granting early does real damage.
What exactly changed in the Budget on 28 October 2026?
EMI2 is an amended CSOP, not a new scheme. It is a tax-advantaged share option plan in which the employee pays no Income Tax or National Insurance on the growth in value, provided the option is exercised between three and ten years after grant. The legislation will still call it CSOP; the new name is meant to show it as the next step for companies that have outgrown EMI or never qualified for it.
HMRC's policy paper on changes to employee share schemes confirms three changes from 6 April 2027, to be legislated in Finance Bill 2026-27:
● The individual limit rises from £60,000 to £120,000.
● CSOP options no longer count towards the individual EMI limit.
● The longest permitted exercise period extends from 10 years to 15 years.
What did not change matters just as much. The exercise price must still be at least the market value of the shares at grant. Anyone holding more than 30% of the company (a "material interest") is still excluded. The three-year minimum before a tax-free exercise also stays.
The cost to the Exchequer shows the scale the government expects. The policy paper puts it at £25 million in 2027/28, rising to £145 million by 2030/31.
Why the EMI interaction matters more than the headline figure
Until 5 April 2027, CSOP and EMI share one ceiling. HMRC's guidance on how CSOP interacts with EMI treats unexercised CSOP options as counting towards an employee's £250,000 EMI limit. So a £60,000 CSOP grant leaves only £190,000 of room for EMI.
The more serious problem is a CSOP grant that pushes someone over the line. HMRC's manual states that if a CSOP grant takes an employee's combined unexercised EMI and CSOP options above £250,000, that is a disqualifying event for the EMI options. A disqualifying event is something that ends the EMI tax advantages unless the options are exercised within a short window, 90 days under the rules in force before 6 April 2027. The CSOP option itself stays tax-advantaged. The damage lands on the EMI options, which are usually the more valuable ones.
Example: a finance director holds EMI options worth £220,000 at grant. The board wants to add £60,000 of CSOP options in February 2027. The total would be £280,000, so the grant triggers a disqualifying event on her EMI options. Granting £30,000 or less would avoid that.
From 6 April 2027 the same grant has no effect on her EMI options. HMRC's Employment Related Securities Bulletin 69 confirms that the change also applies to EMI options already in existence. One person can therefore hold £250,000 of EMI options and £120,000 of EMI2 options, a combined £370,000 at grant value.
EMI2 & Share Option Tax Planner: What Directors Need to Know for 2027
Navigating the transition from the Company Share Option Plan (CSOP) to EMI2 requires careful balancing of grant timings, individual allowance caps, and potential EMI disqualifying event traps. This interactive dashboard, created by Pro Tax Accountant, allows UK directors and business owners to model the exact after-tax outcomes of option grants, test the interaction between £250,000 EMI limits and the new £120,000 EMI2 ceiling, and evaluate whether to grant before or after 6 April 2027. Use the tabbed navigation below to explore exchequer cost projections, simulate tax savings across England, Wales, and Scotland, and run your company's strategic grant timeline against HMRC's latest statutory rules.
Should you grant before 6 April 2027 or wait?
The answer depends on how fast your share value is rising and on whether each recipient already holds EMI options.
Your position | Grant before 6 April 2027 | Wait until 6 April 2027 or later |
Share value rising quickly (funding round or strong growth expected) | Fixes a lower exercise price on up to £60,000; you can top up later | Higher exercise price on the whole grant |
Share value broadly flat | Little gained; maximum 10-year exercise period | One grant of up to £120,000 with a 15-year exercise period |
Recipient already holds EMI options close to £250,000 | Risk of an EMI disqualifying event | No interaction at all |
Recipient holds no EMI options | Safe up to £60,000 | Up to £120,000 |
Company sale likely within three years | Gain usually taxed as income either way | Same problem; consider whether EMI2 is the right tool |
The limit caps the total market value of shares under the unexercised options a person holds. On HMRC's description, an employee granted £60,000 in early 2027 could therefore receive a further £60,000 from 6 April 2027. The transitional wording will be in the Finance Bill 2026-27 clauses, so confirm it before you rely on a top-up.
What does EMI2 save compared with an ordinary option?
Example: a technology company with 650 staff, too large for EMI, grants a head of product an EMI2 option on 3 May 2027. The option is over shares worth £120,000 at grant, with the exercise price set at that value. On 1 June 2030, after more than three years, the head of product exercises and immediately sells the shares for £300,000. The gain is £180,000. The example assumes the 2026/27 rates still apply and that the head of product's salary is above £125,140.
Under EMI2, there is no Income Tax or National Insurance on exercise. The £180,000 is a capital gain. After the £3,000 annual exempt amount (the tax-free allowance for capital gains), Capital Gains Tax at 24% is £42,480. The employee keeps £137,520. The company pays no employer National Insurance on the gain.
Under an ordinary, non-tax-advantaged option over shares that can readily be sold, the £180,000 is taxed as employment income through payroll:
Amount | |
Income Tax at 45% | £81,000 |
Employee National Insurance at 2% | £3,600 |
Employee keeps | £95,400 |
Employer National Insurance at 15% (paid by the company) | £27,000 |
EMI2 leaves the employee £42,120 better off and saves the company £27,000. The point where this flips is the third anniversary of the grant. If the company is sold, or the option is exercised, before 3 May 2030, the gain is generally taxed as income. The exceptions are a good leaver exercising within six months of leaving, death, and certain takeovers. A board expecting an exit within three years should test that timing before choosing EMI2.
Scottish taxpayers pay the same Capital Gains Tax rates as the rest of the UK, so the EMI2 result is identical. The ordinary-option comparison is worse in Scotland, because Scottish Income Tax rates are higher at the top. Welsh taxpayers pay the same rates as England.
Why EMI still comes first if you qualify
If your company qualifies for EMI, EMI2 is the second layer, not the first. EMI shares can qualify for Business Asset Disposal Relief (BADR), a reduced 18% Capital Gains Tax rate, without the usual requirement to own 5% of the company. The option only has to have been granted at least two years before the sale.
The GOV.UK guidance on Business Asset Disposal Relief gives no such route for shares acquired through a CSOP. EMI2 holders need the full 5% personal company test, which few employees meet.
On the £180,000 gain in the example, BADR at 18% would give tax of £31,860, against £42,480 at 24%: a difference of £10,620. From 6 April 2027, the BADR lifetime limit falls from £1 million to £500,000, which reduces the advantage for larger EMI gains. Use EMI up to £250,000 per person first, then EMI2 for anything above it.
HMRC's Employee Share Schemes Statistics, published on 3 July 2026, show how dominant EMI has been. Of the 20,650 companies operating tax-advantaged schemes in the tax year ending 5 April 2025, 90% operated EMI. The value of CSOP options granted fell by 19% on the previous year. On Pro Tax Accountant's reading of the Budget, EMI2 is aimed at reversing that fall among companies just past the EMI size limits.
When should you take advice?
You can follow the headline rules yourself. Advice is worth having when:
● options are spread across EMI and EMI2;
● a funding round or sale is in view; or
● the valuation is uncertain.
A grant at less than market value, or a grant that breaches the EMI limit before 6 April 2027, cannot easily be undone.
Pro Tax Accountant's employee share scheme service works out each person's headroom under both limits and models the after-tax outcome on exercise and sale. It also prepares the market value case for HMRC, reviews your plan rules for hard-coded limits, and registers the plan and files the annual returns.
What to do before 6 April 2027
Before any grant made on or before 5 April 2027: list every recipient's unexercised EMI and CSOP options at grant value. Keep any CSOP grant within both the £60,000 limit and the £250,000 combined ceiling.
By January 2027: decide whether a rising valuation justifies a pre-April grant, or whether a single £120,000 grant from 6 April 2027 is better.
Before the first post-April grant: review your plan rules for wording that fixes £60,000, 10 years or 90 days, and amend them.
Ahead of each grant date: agree the market value of the shares with HMRC where possible, and record the board decision on the grant date.
By 6 July after each tax year in which options are granted: register the plan with HMRC if it is new, and file the annual return through HMRC's Employment Related Securities online service.
When the Finance Bill 2026-27 clauses are published: confirm the transitional rules on top-up grants before relying on them.
FAQs
I own 35% of the company. Can I give myself EMI2 options?
No. Anyone with a material interest of more than 30% of the company, counting shares held by close associates, cannot take part in a CSOP. This is unchanged by the move to EMI2, and the same exclusion has always applied to EMI.
What happens to my EMI2 options if I leave before three years?
If you leave in circumstances the legislation treats as a good leaver, such as injury, disability or redundancy, you keep the tax advantages if you exercise within six months of leaving. If you die, your personal representatives have 12 months. Otherwise the company's plan rules decide whether the option lapses. Any early exercise outside these exceptions is generally taxed as income.
Can our existing CSOP options be extended to 15 years?
Yes. HMRC's Employment Related Securities Bulletin 69 says existing CSOP option agreements can be amended to use the 15-year exercise period without losing their tax advantages, provided the amendment follows the legislation. The amendment must be made properly under your plan rules, so check them first.
Does the company get a corporation tax deduction when employees exercise EMI2 options?
Generally yes. Under the corporation tax rules for employee share acquisitions, the company can usually deduct an amount equal to the employee's gain on exercise, even though the employee pays no Income Tax on it. On a £180,000 gain, that deduction is worth £45,000 at the 25% main rate.
Do we still need to notify HMRC each time we grant EMI options?
Not from 6 April 2027. The separate HMRC notification for EMI grants is removed for options granted on or after that date. Grants will be reported on the EMI annual return instead. EMI2 grants have never needed a grant notification, but the plan must still be registered and annual returns filed.
About the Author:
Adil Akhtar, ACMA, CGMA, FCMA (membership ID is 990250923) serves as CEO and Chief Accountant at Pro Tax Accountant, bringing over 18 years of expertise in tackling intricate tax issues. As a respected tax blog writer, Adil has spent more than eighteen years delivering clear, practical advice to UK taxpayers. He also leads Advantax Accountants (registered with Companies House), combining technical expertise with a passion for simplifying complex financial concepts, establishing himself as a trusted voice in tax education.
Email: adilacma@icloud.com
Disclaimer: This article sets out the general position under UK tax law for the 2026/27 tax year. The information has been checked against HMRC guidance and other official sources at the date shown above, and is reviewed when the rules change. Tax legislation is complex and outcomes depend on your individual circumstances, so this article is provided for general information and does not constitute advice on which you should act. Any figures or worked examples are illustrative. Before making any decision, obtain advice specific to your situation from a qualified professional. Pro Tax Accountant accepts no liability for loss arising from reliance on this article alone.
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