Two acronyms dominate UK option paperwork, and which one is printed on yours quietly sets your limits, your timetable and your exit tax rate. EMI is the famous one; CSOP — the Company Share Option Plan — is its older, stricter sibling that suddenly matters again now that scale-ups routinely graduate from one to the other. Here is the comparison from the only seat that matters to you: the recipient’s.
The shared promise
Both schemes are HMRC tax-advantaged discretionary plans — the company chooses who gets options and how many (unlike all-employee SIP/SAYE schemes, covered here). Both require options granted at an exercise price not less than market value at grant. And both, used correctly, deliver the same headline: no income tax or NI when you exercise; tax waits for sale, as capital gains. That single feature separates both schemes from unapproved options, where exercising a big gain can cost 40-47% immediately (the unapproved world).
Where the scales tip
| EMI | CSOP | |
|---|---|---|
| Who can grant | Small qualifying companies: <250 FTE employees, ≤£30m gross assets, independent, qualifying trade | Any company meeting scheme/share conditions — including listed groups; no size cap |
| Per-employee limit | £250,000 (3-year window, by grant-date value) | £60,000 of unexercised options (doubled from £30,000 in April 2023) |
| Tax-free exercise condition | Granted at ≥ market value; no minimum holding period | Granted at ≥ market value and normally exercised 3-10 years from grant (statutory exceptions aside) |
| Working-time test | 25 hrs/week or 75% of working time | None comparable for most employees |
| Sale tax | CGT 18%/24% — or 14% via BADR with the EMI 2-year shortcut | CGT 18%/24%; BADR only via the ordinary 5%-shareholding route (rare for option-sized stakes) |
| Typical habitat | Startups and early scale-ups | Graduated scale-ups, larger private companies, listed companies |
The CSOP 3-year rule, in practice
CSOP’s tax break is earned by patience: exercise between the third and tenth anniversaries of grant and the gain escapes income tax. Exercise earlier and — outside protected cases such as certain redundancy, injury/disability, retirement and takeover scenarios written into the legislation and your plan — the spread is employment income through payroll. Practically, plans are drafted so vesting and exercise windows respect the 3-year line, and takeovers usually engage the protected exceptions or rollover terms; the employees who get burned are those exercising voluntarily early without checking the date arithmetic. Diary the third anniversary the day you’re granted.
The exit mathematics, side by side
Same gain, two wrappers
Options over shares worth £4 at grant (exercise price £4); company sold at £12; you exercise-and-sell 10,000 options on completion. Gain: £80,000; assume the £3,000 exempt amount is used here and you are a higher-rate taxpayer.
- EMI, 2+ years from grant: BADR at 14% → tax ≈ £10,780.
- CSOP, 3+ years from grant: CGT at 24% → tax ≈ £18,480.
- Unapproved (for contrast): £80,000 of employment income at exercise → roughly £32,000-£37,600 income tax plus NI.
Both advantaged schemes crush the unapproved outcome; EMI’s relief shortcut adds the final, meaningful edge.
When your company graduates
A scale-up crossing 250 employees or £30m of assets doesn’t torch existing EMI options — eligibility is tested at grant, and previously granted options ride on (acquisition by another company is the dangerous event, with its 90-day clock — see the EMI tax guide). What changes is the future: new grants arrive as CSOP, with the £60,000 ceiling and the 3-year discipline. If you hold both vintages, keep a one-line register per grant — scheme, date, price, the relevant anniversary — because the optimal exercise timing differs by wrapper sitting in the same portfolio.
Your certificate, decoded in five questions
- Which scheme does the agreement name — EMI, CSOP, or neither (unapproved)?
- Exercise price vs grant-date value — equal (clean) or discounted (taxable element)?
- For CSOP: when is the 3rd anniversary, and what exercise windows does the plan actually open?
- For EMI: any disqualifying-event news, and does your timeline reach the 2-year BADR mark?
- Leaver terms — what survives resignation, redundancy, or a sale?
Five answers, one index card, and the acronym on your certificate stops being trivia and becomes a plan.
Key takeaways
- Both EMI and CSOP can deliver income-tax-free, NI-free exercise — the headline tax outcome is similar when each scheme's rules are met.
- CSOP's tax-free exercise normally requires holding the option at least 3 years from grant (with exceptions for certain 'good leaver' and takeover events); EMI has no such minimum.
- Limits differ sharply: £250,000 of options per employee under EMI vs £60,000 under CSOP; EMI is restricted to smaller companies, CSOP has no company-size cap.
- Only EMI gains get the special route to Business Asset Disposal Relief (14% in 2025/26) without the 5% shareholding tests; CSOP gains face normal CGT at 18%/24%.
- Employees usually meet CSOP at larger or listed companies — including scale-ups that outgrew EMI eligibility.
Frequently asked questions
Why did my company switch from EMI to CSOP grants?
Almost always because it outgrew EMI: more than 250 employees, over £30m gross assets, loss of independence, or hitting scheme caps. Existing EMI options generally keep their status; new grants simply arrive under CSOP rules — the standard 'graduation' path since CSOP's limit doubled to £60,000 in 2023.
What happens if I exercise a CSOP option before 3 years?
Outside the protected exceptions (certain injury, redundancy, retirement, TUPE and takeover situations), an early exercise loses the tax advantage: the gain at exercise is taxed as employment income, usually with NI through PAYE. The 3-year patience requirement is the scheme's core discipline.
Can I hold both EMI and CSOP options at once?
Yes, and scale-up employees often do — older EMI grants plus newer CSOP ones. Each follows its own rules, and note that unexercised CSOP options count against your £250,000 EMI headroom.
Is CSOP 'worse' than EMI?
For the employee it's a narrower wrapper: smaller limit, the 3-year wait, and no BADR shortcut. But a market-value CSOP exercised after 3 years still converts your entire gain into CGT instead of income tax — a result unapproved-option holders can only envy.
Educational disclaimer: This guide is general information, not financial, investment, tax or legal advice. Figures refer to the tax years stated and change over time; rules differ by jurisdiction and personal circumstances. Verify current figures with the IRS / HMRC and consult a qualified professional before acting. See our full disclaimer.