What is EMI2?

For many years, the enterprise management incentives (EMI) scheme has been one of the most valuable tax reliefs available to smaller entrepreneurial companies. It allows growing businesses to give key employees a meaningful stake in their future without requiring them to find the cash to acquire shares at an early stage. 

Changes which took effect in 2026 significantly widened the number of businesses able to use EMI. Budget 2026 now takes a further step, with the introduction of EMI2, the new name for an expanded company share option plan (CSOP). 

Overall the changes suggest the government is trying to strengthen the tax environment throughout the lifecycle of an entrepreneurial business: supporting innovation, helping businesses recruit and retain people as they grow, allowing tax-advantaged options to continue further into the scaling process and, ultimately, rewarding qualifying founders when they exit. 

Previous enterprise management incentive (EMI) scheme changes 

The changes to EMI that took effect from 6 April 2026 were substantial: 

• The company’s gross assets limit increased from £30 million to £120 million 

• The maximum number of employees increased from 250 to 500 

• The total value of EMI options which a company can have outstanding increased from £3 million to £6 million 

At the same time, the maximum life of an EMI option increased from 10 to 15 years. And there is one further change due to be introduced is the number of days to exercise an option once there is a disqualifying event will be extended from 90 to 120.  

These changes indicate the government is looking for EMI to be used by more mature and larger businesses. Companies have more room to grow before moving outside the scheme.  

Sadly, the individual limit of £250,000 was not increased in the 2026 finance bill – but is EMI2 an opportunity to expand the value of share options being granted? 

Where does EMI2 fit in? 

EMI2 isn’t a second version of EMI in the strict sense. It is the Government’s new name for the expanded company share option plan, or CSOP. 

EMI remains the more generous scheme, but it comes with detailed qualifying conditions applying to company size, qualifying trades and the number of participating employees. EMI2 provides a tax-advantaged option arrangement where EMI isn’t available – there are no limits to size, trade or employee numbers. 

Currently, an employee can hold CSOP options over shares with a market value at grant of up to £60,000. There is also an interaction between CSOP and EMI so that there is a combined limit of  £250,000 (the same as the EMI limit). 

EMI2 will introduce changes from 6 April 2027 so that the individual option limit will double from £60,000 to £120,000. The Budget also provides for a 15-year exercise period (like EMI) and removal of the interaction with the EMI option limit. 

CSOP was previously framed as a post-EMI scheme for larger businesses but many companies found it unattractive in practice and the options that could be offered too low in value to be meaningful. Now, though, businesses may increasingly need to consider how the two schemes can form part of a share incentive strategy, potentially running in parallel. Might it now be possible to grant an employee £370,000 of tax approved share options in one year? Watch this space.  

From starting to scaling…

Access to capital is often one of the first challenges for growing businesses.  

Alongside the headline announcement of EMI2, the government has published its response to last year’s wider consultation on tax support for entrepreneurs. This includes a number of targeted changes intended to simplify the enterprise investment scheme (EIS), seed enterprise investment scheme (SEIS) and venture capital trust (VCT) rules. No more restrictions on issuing EIS and SEIS shares on the same day! 

These follow the substantial increases to the EIS investment and company size limits which took effect in April 2026. 

The maximum amount a company can raise annually under EIS and the VCT rules doubled from £5 million to £10 million, with a higher £20 million limit for knowledge-intensive companies. The lifetime limits doubled from £12 million to £24 million, and from £20 million to £40 million for knowledge-intensive companies. 

The size of company able to benefit also increased substantially. The relevant gross assets limits doubled from £15 million to £30 million immediately before the investment and from £16 million to £35 million immediately afterwards. The government expressly described the purpose of the EIS changes as continuing to support new and early-stage companies as well as those scaling up. 

There are other parts of the tax system supporting the same journey. R&D tax relief continues to support qualifying expenditure on scientific and technological innovation, with the government also looking at reducing some of the administrative friction around claims.  

The broader theme is that businesses are being given greater scope to raise tax-advantaged investment, recruit and incentivise key people, and to continue doing so as they scale. 

…and eventually, exit

Finally, there is founders’ relief. The detailed conditions will be covered in a separate blog, but the direction is relevant to the same group of businesses. From 6 April 2027, the proposed relief would provide qualifying founders and significant early investors with a 10% capital gains tax rate on qualifying disposals, subject to a £10 million lifetime cap per individual. 

The government itself connects these measures. Its founders’ relief consultation refers to EMI and EMI2 as helping growing companies attract and retain talent, before describing founders’ relief as building on that offer by recognising founders and significant early investors who have built businesses with a proven record of growth and innovation. 

A more joined-up offer?

Taken together, there is a lot here for entrepreneurial businesses to consider. 

From our perspective at PKF Francis Clark, the most encouraging aspect is that the different measures, introduced in the 2025 and 2026 budgets, add up to a significant impact on the growing company’s lifecycle. 

The expansion of EIS gives qualifying companies greater capacity to raise tax-advantaged investment. The 2026 EMI changes allow more businesses to use employee share options, and to continue using them for longer as they grow.  

From April 2027, EMI2 should add another potentially valuable option, particularly if the removal of the existing interaction between EMI and CSOP allows the two schemes to be used alongside each other more effectively. 

There are still important details to work through. In particular, until the EMI2 legislation is available, it would be premature to assume that an employee can simply be granted £250,000 of EMI options and £120,000 of EMI2 options simultaneously. But the proposed removal of the interaction between the limits suggests that EMI and EMI2 could become complementary parts of a company’s incentive strategy, rather than alternative regimes. 

The wider tax picture is a bit more mixed. Business asset disposal relief has become less generous, while the new founders’ relief is much more specifically targeted at founders and significant early investors in high-growth, innovative companies. The conditions applying to that new relief will therefore matter enormously. 

Overall, however, there is an increasingly interesting combination of reliefs available to qualifying entrepreneurial businesses: support for raising investment, greater flexibility to incentivise key employees as the business grows and, potentially, a more favourable regime for certain founders on an eventual exit.