Company Share Option Plan (CSOP) changes

Increase the maximum value of shares over which an employee may hold CSOP options from £60,000 to £120,000 

There is currently an individual employee maximum share option limit based on market value at grant of £60,000. From 6 April 2027, the government will double this limit to £120,000.

Remove the interaction between the CSOP and Enterprise Management Incentives (EMI) individual limits

Currently, CSOP options count towards the £250,000 EMI individual limit. From 6 April 2027, the government will remove the interaction. Employees will be able to be granted CSOP options, without it impacting their EMI options, including existing EMI options.

Increase the maximum CSOP option exercise period from 10 years to 15 years 

The maximum exercise period for CSOP options is currently 10 years. From 6 April 2027, the government will increase this to 15 years to align with the exercise period for EMI. CSOP options granted on or after 6 April 2027 can have an exercise period of up to 15 years. CSOP option agreements in existence before 6 April 2027 can be amended to benefit from the new maximum exercise period without losing the tax advantages the scheme offers, provided the amendment is in line with the legislation.

CSOP’s new name: Enterprise Management Incentives 2 (EMI2) 

From 28 October 2026, CSOP will also be rebranded to ‘EMI2’. This reflects its strengthened role as both a complementary scheme to EMI and a follow-on scheme for companies that have outgrown EMI. The scheme name will remain as CSOP in legislation.

Enterprise Management Incentives (EMI) changes

Maintaining EMI eligibility during transition to an Employee Ownership Trust

The EMI independence requirement contains an exception for a company subject to an Employee Ownership Trust (EOT). The government has announced that the existing EOT exception will be extended so that it also applies where arrangements are in place for it to become EOT-owned. Any EMI companies arranging on or after 6 April 2027 to become controlled by an EOT can continue to grant qualifying EMI options.

Extending the EMI exercise window after a disqualifying event

Following a disqualifying event, employees currently have 90 days to exercise their options and retain the associated EMI tax advantages. From 6 April 2027, the government will extend this period to 180 days. The new window will also apply to EMI option agreements in existence before 6 April 2027, provided the disqualifying event occurs on or after 6 April 2027.

Changes to the process to notify a grant of EMI options

As announced at Budget 2025, from 6 April 2027 the government will remove the requirement for a company to submit a separate notification of a grant of EMI options. Instead, the company will be required to notify a grant of such options through the EMI annual return.

The changes apply to options granted on or after 6 April 2027.

Other changes

Increasing the exercise periods for shares earmarked by third parties 

When a third party sets aside shares for an employee, an Income Tax charge can arise on the employee before they have exercised the option, acquired the shares or received any value from them. Exceptions exist to ensure that genuine employee share option arrangements can operate without triggering this tax charge. These exceptions currently apply to relevant shares for up to 10 years from the date the option was granted.

From 6 April 2027, the government will extend the period for the ‘earmarking’ exceptions from 10 years to 15 years. The new period will also apply to unexercised share and share option agreements in existence before 6 April 2027.

Reducing the Business Asset Disposal Relief (BADR) lifetime limit

BADR reduces the rate of Capital Gains Tax payable on qualifying business disposals. Qualifying gains are currently taxed at 18%, subject to a lifetime limit of £1 million. From 6 April 2027, the government will reduce the lifetime limit to £500,000 for qualifying disposals. This change may affect individuals whose gains exceed the new lifetime limit, including employees disposing of EMI shares.

Securities transfer tax: Retaining the de minimis limit for non-electronic transactions

The government is modernising the Stamp Taxes and Shares framework by legislating to replace Stamp Duty and Stamp Duty Reserve Tax with the securities transfer tax from late 2027. Draft legislation was published on 13 July 2026 for consultation.

Following concerns raised about the administrative impact on employee share schemes, the legislation has been amended to:

• retain the current ‘de minimis’ for ‘non-electronic’ transactions with a consideration of £1,000 or below
• make the employer liable to report and pay the securities transfer tax (rather than the employee)
• put beyond doubt that a payment of securities transfer tax by an employer will not result in an income tax liability for the employee

The securities transfer tax will be legislated for in Finance Bill 2026-27, and the legislation will come into force in late 2027 via a commencement order. Further information and guidance will be provided in due course.

The summary of responses to this consultation has now been published. Find out about Modernising the taxation of distributions and repayments of capital from companies. The government recognises that the proposed reforms to the purchase of own shares rules may impact shareholders who have acquired shares through tax advantaged employee share schemes. The government will continue to work closely with stakeholders throughout the technical consultation to ensure that the reforms achieve their policy objectives while preserving the benefits and incentives that these schemes provide to businesses, employees and investors.

HMRC will spend the coming months developing more detailed technical proposals to implement these changes and will reach out to stakeholders in early 2027 to discuss our further work. In the meantime, if it would be helpful to discuss any aspect of the response or next stages, please contact us at distributionsreform@hmrc.gov.uk.