Side by side
| EMI | CSOP | |
|---|---|---|
| Company size | Fewer than 500 full-time equivalent employees and gross assets of no more than £120 million (from 6 April 2026) | No size limit |
| Excluded activities | Yes. Certain trades, such as property development, banking, and legal and accountancy services, do not qualify | None |
| Limit per employee | £250,000 of unexercised options | £60,000 of unexercised options |
| Limit per company | £6 million of unexercised options (from 6 April 2026) | None |
| Exercise price | Can be below market value, with income tax on the discount at exercise | Must be at least market value at grant |
| When exercise is tax-free | Any time within 15 years of grant, if the conditions are met | Generally between three and ten years after grant |
| Working time | At least 25 hours a week or 75% of working time | No minimum for employees |
| Capital gains on sale | Business Asset Disposal Relief can apply two years after grant, with no 5% shareholding requirement | Standard capital gains tax rules |
| Valuation | AMV and UMV, can be agreed with HMRC | Market value, can be agreed with HMRC |
When EMI is the right choice
Most early and growth-stage technology and life science companies qualify for EMI, and the 2026 increases to the employee, asset, and company limits have extended it to much larger businesses than before. EMI lets you make meaningful grants to key hires, exercise on an exit without a minimum holding period, and gives employees a route to a lower capital gains tax rate.
When CSOP makes sense
- The company has passed the EMI employee or gross assets limits.
- The company has reached the £6 million EMI cap on unexercised options.
- The business carries on an activity that EMI excludes.
- The company is a subsidiary of a listed group, which rules out EMI but can still allow CSOP options over the parent's shares.
The trade-offs are the £60,000 individual limit, no ability to grant at a discount, and the need to hold the option for three years before exercising with full tax relief, apart from certain good leaver and takeover situations.
Reporting to HMRC
Both schemes need registering with HMRC and an annual return. EMI grants must also be notified to HMRC by 6 July following the end of the tax year in which they were granted. For options granted on or after 6 April 2027, the government has announced that this separate notification will be replaced by reporting through the annual return.
The valuation is the common thread
Whichever scheme you use, the tax treatment turns on the market value of the shares at grant. Under EMI, an exercise price below Actual Market Value creates an income tax charge. Under CSOP, an exercise price below market value means the option does not qualify at all. Agreeing the valuation with HMRC before granting removes that risk in both cases.
See our UK EMI valuation service, or our guide to AMV vs UMV for how the EMI figures work.
Frequently asked questions
Is EMI better than CSOP?
For a company that qualifies, usually yes. EMI allows larger grants, more flexible terms, and more favorable capital gains treatment. CSOP is the alternative for companies that are too large for EMI or carry on an excluded activity.
Can a company run EMI and CSOP at the same time?
Yes, but the limits interact. Unexercised CSOP options count toward an employee's £250,000 EMI limit.
What happens when a company outgrows EMI?
Existing EMI options are generally unaffected, but no new EMI options can be granted once the company exceeds the limits. Many companies move to CSOP for new grants at that point.
Do both schemes need a valuation?
Yes. Both depend on the market value of the shares at the date of grant, and in both cases the valuation can be agreed with HMRC in advance.
This page is general information, not tax or legal advice. It reflects US and UK rules as we understand them in October 2026; confirm how they apply to your company with your advisers.