Could share options through EMI2 give your employee retention strategy a boost?

For many growing businesses, attracting and retaining the right people remains a challenge. With around three in ten UK employees moving to a new employer each year, businesses need to think beyond salary alone. That’s why longer-term incentives, such as share options, could support your retention strategy, and the changes announced in the 2026 Autumn Budget could now make share options relevant to even more businesses.

One of the headline changes is the introduction of “EMI2”, which despite its name, isn’t a completely new scheme. It’s a rebrand of the existing Company Share Option Plan (CSOP), with changes intended to make it more accessible from April 2027.

Meaning it could provide another way for you to reward the people who are key to the future of your business.

What are share options?

A share option gives an employee the right to acquire shares in their employer in the future at a price agreed when the option is granted.

This can create a direct link between the employee’s reward and the future growth of the business. If the company increases in value, the value of the employee’s potential reward can increase too.

The Enterprise Management Incentive, usually known as EMI, is a popular tax-advantaged scheme. Allowing qualifying employees to be granted options over shares worth up to £250,000 at grant, normally with no income tax or National Insurance on exercise.

But not every business qualifies. The EMI regime is aimed at smaller, growing companies and so there are restrictions around the size and activities of the company and conditions participating employees need to meet. Nevertheless, numerous limits were substantially extended from April 2026.

But the CSOP regime is different. It is generally available to companies of all sizes and sectors, making it particularly relevant to businesses that have grown too large for EMI or whose activities mean they cannot qualify.

What is changing from April 2027 and why is it good news?

Firstly, the rebrand, which is effective now. Legally, the scheme will remain CSOP, but the EMI2 name reflects its role alongside EMI and as an option for businesses that have outgrown it.

From 6 April 2027, the individual limit will double to £120,000. But perhaps more importantly, CSOP options will no longer count towards the EMI limit.

Meaning a qualifying employee could therefore hold £250,000 of EMI options and £120,000 of EMI2 options. Giving them tax-advantaged options over shares worth up to £370,000 at grant across both arrangements.

The maximum period over which an EMI2 option can be exercised while retaining its tax advantages will also increase from 10 years to 15 years, bringing it in line with the recently extended EMI rules. Existing EMI2 (CSOP) options can also be amended to benefit from the change. The minimum three-year period before exercise remains unchanged.

For businesses wanting to provide a meaningful equity incentive to senior or key employees, that additional flexibility could be significant.

Why might a business consider share options?

Tax efficiency is clearly one attraction. But it shouldn’t be the only reason to consider an employee shares scheme.

Options can be used to:

• Recruit key individuals where competing on salary alone is difficult
• Retain important employees over the longer term
• Reward management for growing the value of the business
• Align the interests of employees and existing shareholders
• Support succession planning
• Incentivise a management team ahead of a future sale

Although qualifying conditions apply, there is scope to tailor arrangements around your business objectives, rather than using a standard scheme that does not fit.

This makes equity incentives about much more than simply giving away shares.

Is EMI2 only relevant if my company doesn’t qualify for EMI?

No.

Recent changes have widened access to EMI, which remains attractive for qualifying businesses and employees. Since April 2026, most companies with gross assets up to £120 million and fewer than 500 employees may qualify.

So, EMI2 may offer an alternative for businesses that have outgrown EMI or operate in an excluded sector.

And for businesses able to access both arrangements, the removal of the interaction between their individual limits will create the opportunity to use them alongside one another.

For any business that may have looked at the Company Share Option Plan and decided that its £60,000 individual limit was too restrictive, this is a great opportunity to look again.

Giving employees an interest in your business is a significant decision, and there are tax, valuation, legal and commercial considerations.

Is it time to review your options?

The changes taking effect from 6 April 2027 provide an opportunity for SMEs to look now at how they reward and retain key people.

Whether you’re already using EMI, have previously considered CSOP or are exploring share options for the first time, it may be worth reviewing what the expanded arrangements could offer.

Our team of tax specialists are on hand to help you further understand all of the share option schemes available to you. Get in touch today to find out how they could fit your business and its longer-term plans.