HMRC have released Employment-Related Securities (ERS) Bulletin 69, which focuses on Budget 2026 changes to the Enterprise Management Incentive (EMI) and the Company Share Option Plan (CSOP) scheme, including rebranding CSOP as Enterprise Management Incentives 2 (EMI2).
Company Share Option Plan (CSOP) changes
From 28 October 2026:
- CSOP will be rebranded to 'EMI2'.
- HMRC say that this reflects its strengthened role as both a complementary scheme to Enterprise Management Incentive (EMI) and a follow-on scheme for companies that have outgrown EMI.
- The scheme name will remain as CSOP in legislation.
It is proposed that from 6 April 2027:
- The maximum value of shares an individual employee may hold in CSOP options will increase from £60,000 to £120,000.
- The interaction between the CSOP and EMI individual limits will be removed.
- Currently, CSOP options count towards the £250,000 EMI individual limit.
- Following the change, employees can be granted CSOP options without it impacting their EMI options, including existing EMI options.
- The maximum exercise period for CSOP options will be increased from 10 years 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.
EMI changes
Maintaining EMI eligibility during transition to an Employee Ownership Trust (EOT):
- The EMI independence requirement contains an exception for a company subject to an EOT.
- The government has announced that the existing EOT exception will be extended to apply 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.
It is proposed that from 6 April 2027:
- The amount of time employees have to exercise their options and retain the associated EMI tax advantages following a disqualifying event will increase from 90 days 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.
- The requirement for a company to submit a separate notification of a grant of EMI options will be removed.
- 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.
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 for 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.
It is proposed that from 6 April 2027:
- The period for 'earmarking' exceptions will be extended 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.
For more detail on the changes to employee share schemes announced in the Budget, see our Budget coverage here: Employment Taxes: Autumn Budget 2026
Reducing the Business Asset Disposal Relief (BADR) lifetime limit
It is proposed that from 6 April 2027:
- The lifetime limit for BADR will be reduced from £1 million to £500,000 for qualifying disposals.
- This change may affect individuals whose gains exceed the new lifetime limit, including employees disposing of EMI shares.
See Capital Gains Tax: Autumn Budget 2026
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 (SDRT) with 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.
Modernising the distributions framework consultation and purchase of own shares
The summary of responses to this consultation has now been published.
- 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 their further work. In the meantime, HMRC can be contacted to discuss any aspect of the response or next stages at
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See Purchase (repurchase) of Own Shares
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