What is a CSOP and when does it beat EMI?
By SuLe · Updated 12 July 2026
A Company Share Option Plan (CSOP) is a tax-advantaged HMRC option scheme with a £60,000-per-person limit and no company size cap — which is why it is the usual fallback once a company outgrows EMI. Where a company still qualifies for EMI, EMI is normally the better choice; CSOP earns its place when EMI is no longer available.
Key facts
- A CSOP lets each participant hold up to £60,000 of options, priced at market value at grant.
- Unlike EMI, a CSOP has no gross-assets or employee-number limit, so it survives scaling.
- Income-tax-free exercise normally requires exercising between three and ten years from grant.
- The £60,000 CSOP limit is far below EMI's £250,000 per employee, so EMI is preferred where available.
- CSOP is the common route once a company passes 250 employees or £30m of gross assets, or fails the EMI trade test.
What is a CSOP?
A CSOP is HMRC's other main tax-advantaged share option scheme for employees. Like EMI, it gives a right to buy shares later at a fixed price, with favourable tax if the conditions are met.
Each participant can hold up to £60,000 of options, measured by the market value of the shares at grant. The exercise price must be at least that market value at grant, so there is no built-in discount.
Exercised in the right window, the gain is taxed as a capital gain rather than as employment income — the same broad shape as EMI, but with tighter limits. [More: What is an EMI share option scheme?]
How does a CSOP differ from EMI?
The headline differences are the limit, the company conditions and the timing. CSOP caps each person at £60,000 of options; EMI allows £250,000. That alone makes EMI more generous where it is available.
But CSOP has no company size limit. EMI needs gross assets of £30m or less and fewer than 250 employees; CSOP has neither, so a company that has scaled past those thresholds can still run a CSOP.
CSOP also has a timing condition EMI lacks: income-tax-free exercise normally requires exercising between three and ten years from grant, whereas EMI's tax break does not depend on a minimum holding period. [More: Who is eligible for EMI options?]
When does a CSOP beat EMI?
When EMI is off the table. The classic trigger is size: a company that has grown past 250 employees or £30m of gross assets can no longer grant EMI, and a CSOP becomes the natural tax-advantaged replacement.
Trade is another. A company whose activities fall outside the EMI qualifying-trade rules never had EMI, but may still be able to use a CSOP, which has its own — different — conditions.
So the honest framing is less "CSOP beats EMI" and more "CSOP is what you reach for when EMI cannot be used." For a company that still qualifies for EMI, EMI usually wins on limits and flexibility. [More: EMI vs unapproved options — what's the difference?]
How is a CSOP taxed?
There is no income tax at grant, because the options are priced at market value. The key condition is the exercise window: exercising between three and ten years from grant normally means no income tax on the gain at exercise.
Hit that window and the growth is taxed as a capital gain when the shares are sold, which is generally lighter than income tax. Exercise outside it and the favourable treatment can be lost, bringing income tax back into play.
Because the tax break depends on that three-to-ten-year window, CSOP suits companies and employees willing to hold for the medium term rather than exit quickly.
| CSOP | EMI | |
|---|---|---|
| Per-person limit | £60,000 of options | £250,000 of options |
| Company size limit | None | ≤£30m assets, <250 FTE |
| Exercise price | At market value at grant | Usually at market value at grant |
| Timing for tax break | Exercise 3–10 years from grant | No minimum holding period |
| Tax on gain | Capital gain if conditions met | Capital gain; BADR without 5% test |
| Typical use | Fallback once EMI is unavailable | First choice where the company qualifies |
Worked example
Sam runs Overstory, a geospatial-mapping company that has scaled to 300 employees and around £40m of gross assets. Both figures now exceed the EMI limits, so Overstory can no longer grant EMI options and moves its scheme to a CSOP.
Sam grants a senior engineer options over shares worth £60,000 at grant — the CSOP maximum — at a market-value exercise price of £2.00 a share, so 30,000 options. There is no income tax at grant.
Four years later Overstory is acquired at £5.00 a share. Because the engineer exercises within the three-to-ten-year window, there is no income tax on exercise. They pay 30,000 × £2.00 = £60,000, sell shares worth £150,000, and the £90,000 gain is taxed as a capital gain.
Where founders go wrong
Assuming CSOP works exactly like EMI.
The £60,000 limit and the three-to-ten-year exercise window are real constraints EMI does not impose.Sticking with EMI after outgrowing it.
Passing 250 employees or £30m of gross assets closes EMI to new grants — move to a CSOP rather than granting invalid EMI options.Ignoring the exercise window.
Exercising a CSOP option too early, before three years, can lose the income-tax break; plan exercises around the window.Overlooking CSOP's own conditions.
CSOP has its own eligibility and share-class rules; qualifying for it is not automatic just because you have left EMI.
Related questions
What is a CSOP?
A Company Share Option Plan is a tax-advantaged HMRC share option scheme. Each participant can hold up to £60,000 of options, priced at market value at grant. Exercised in the right window, there is no income tax on the gain — the growth is taxed as a capital gain instead. [More: What is an EMI share option scheme?]
When does a CSOP beat EMI?
Mainly when EMI is not available. Once a company has gross assets over £30m, 250 or more employees, or a non-qualifying trade, EMI closes and a CSOP becomes the usual tax-advantaged fallback. CSOP has no company size limit, so it keeps working as you scale. [More: Who is eligible for EMI options?]
What is the CSOP limit per person?
£60,000 of options per participant, measured by the market value of the shares at grant. That is lower than EMI's £250,000 per employee, which is one reason EMI is preferred where a company still qualifies for it. [More: What is an EMI share option scheme?]
How is a CSOP taxed?
Options are priced at market value at grant, so there is no income tax at grant. Income-tax-free exercise normally requires exercising between three and ten years from grant; the gain is then taxed as a capital gain on sale rather than as employment income. [More: What exercise price should EMI options have?]
Is EMI always better than a CSOP?
Where a company qualifies for EMI, EMI is usually better: a higher £250,000 limit, no minimum holding period for the tax break, and Business Asset Disposal Relief without the usual 5% test. CSOP is the fallback for companies or people that cannot use EMI. [More: EMI vs unapproved options — what's the difference?]
Choosing between EMI, CSOP and unapproved options is really about what your company still qualifies for and how you expect people to realise their shares — get it wrong as you scale and you grant options that do not deliver the tax treatment you promised. A SuLe solicitor can pick and set up the right scheme for your stage. Book a free call about your option scheme and make sure your plan still fits as you grow.
Keep reading: What is an EMI share option scheme? · Who is eligible for EMI options? · EMI vs unapproved options — what's the difference? · What exercise price should EMI options have? · How big should a startup option pool be? · What are growth shares?
Primary sources: GOV.UK — Enterprise Management Incentives (EMIs)
