Autumn Budget 2026: Impact on Employee Share Schemes

The 2026 Autumn Budget's share scheme announcements deserve attention from employers, founders and management teams. The proposed changes include an expanded and rebranded Company Share Option Plan (CSOP), greater flexibility for Enterprise Management Incentives (EMI) and simpler EMI reporting, all scheduled for 6 April 2027. Alongside these measures, a new Founders' Relief and a reduction in the Business Asset Disposal Relief lifetime limit could reshape tax outcomes for certain founders and employees on exits and share sales. 

For further information, please refer to our Tax team's full budget briefing which can be found here. The Government's Budget 2026 website and supporting documentation can be found here.

CSOP is expanded and becomes "EMI2"

From 6 April 2027, the Government proposes to rename CSOP "EMI2", reflecting its role for growing companies that have moved beyond EMI or do not qualify for it. The individual option limit will also double from £60,000 to £120,000, and the maximum period for exercising options while retaining tax advantages will extend from 10 to 15 years, matching the position for EMI. The Government hopes the higher individual limit will give businesses a more generous and flexible way to attract and retain talented employees while allowing employees to share in the value they help their companies create.

The interaction between the CSOP and EMI individual option limits will also be removed, meaning eligible employees can receive £250,000 of EMI options and £120,000 of CSOP options.

These changes may prompt employers to revisit their choice of share plan and consider implementing a CSOP, particularly where EMI eligibility or CSOP/EMI award capacity has constrained their incentive arrangements. A higher CSOP individual option limit could support larger awards, while a longer exercise period may give employees more flexibility to align the exercise of their options with a company's growth and exit timetable. It remains to be seen whether CSOP will in fact be renamed EMI2 given the potential for confusion with EMI schemes. 

Before amending outstanding awards to reflect the new provisions, employers should check the legislation's transitional provisions once published. In any case, existing plan rules and employee communications should be updated to reflect these provisions from 6 April 2027 onwards. 

More flexibility for EMI and employee share ownership

The Budget proposes three further changes relevant to employee share schemes from 6 April 2027: extending the EMI exercise window following a disqualifying event from the existing 90 days; retaining access to EMI for companies arranging to become controlled by an Employee Ownership Trust; and allowing certain tax-advantaged and non-tax advantaged shares and share options reserved by third parties to be held for 15 years without triggering disguised remuneration rules. 

The longer EMI exercise window following a disqualifying event is proposed to apply to existing options, so long as the relevant disqualifying event occurs after 6 April 2027. This should prompt a review of option terms and participant communications in due course to ensure they reflect the new statutory provisions once the new legislation is published. There is some inconsistency in the Government's materials on this point; the Share Plans policy paper refers to 180 days whilst the separate Government response to the Tax Support for Entrepreneurship paper refers to 120 days. No doubt this will be clarified when the Finance Bill is published. 

EMI reporting: simpler, but not abolished

As trailed before the budget, from 6 April 2027, the separate notification requirement for EMI option grants will be removed. Grants will instead be reported through the existing EMI end-of-year return. 

This will allow companies to streamline grant processes and update compliance checklists. However, employers and administrators should remember that this change will apply for EMI options granted in the 2027 / 2028 tax year; EMI options granted during the current tax year must continue to be reported using the existing separate notification template by 6 July 2027. 

Founder and employee share sales and exits: contrasting changes to CGT reliefs

The Government proposes to implement a new Founders' Relief from 6 April 2027, offering a 10% capital gains tax (CGT) rate on up to £10 million of lifetime gains for qualifying founders of high-growth, innovative companies. A technical consultation on the detailed design was launched on 28 October 2026. Eligibility will be subject to strict conditions relating to the individual's shareholding, the length of ownership and the company's performance. The relief will target founders who held a significant stake in the company at an early stage and retained shares for a sustained period before disposal.

By contrast, the lifetime gains limit for Business Asset Disposal Relief (BADR), which provides an 18% CGT rate on qualifying disposals, will fall from £1 million to £500,000 for disposals from 6 April 2027. 

These new measures make it particularly important to consider the eligibility requirements for each relief. Founders and other employee shareholders may face different outcomes, and this should be assessed once the design for the new relief has been finalised. 

What should employers do now?

In summary, employers should:

• Assess whether the expanded CSOP framework could support future grants.
• Ahead of 6 April 2027, review existing plan rules, employee communications and internal practice against the proposed CSOP, EMI and BADR changes.

• Prepare to update EMI reporting processes from 6 April 2027.