UK employers rethink share schemes after Budget boost

The Autumn Budget has delivered a significant boost to employee share ownership, with changes that could encourage more employers to offer tax-advantaged share options. For HR teams, the reforms could provide new opportunities to attract, reward, and retain key talent. We’ll speak to a share plans expert about the changes and HR’s role in communicating the benefits of them. 
The Chancellor, John Healey, announced in his Budget on 28 October that from April 2027, the government will be doubling the individual limit under Company Share Option Plans, or CSOP, from £60,000 to £120,000. It is also removing restrictions on combining CSOP with Enterprise Management Incentives, or EMI, opening up the possibility of eligible employees holding options worth up to £370,000 across the two schemes, measured by their value at the date of grant.
The changes have been welcomed by the Employee Share Ownership Centre, which has long campaigned for wider employee share ownership. The Centre says the reforms reflect its longstanding calls for closer alignment between CSOP and EMI, although it believes more needs to be done to widen participation in employee share schemes.
The changes could make CSOP a more attractive option for employers looking to reward key employees. Recent increases in EMI eligibility thresholds also mean more private companies and smaller listed businesses may now qualify to offer both schemes. But making the most of these opportunities involves more than introducing a tax-efficient share scheme. Employers also need to consider how the arrangements will work in practice and how to encourage employees to participate.
And while the Budget has been welcomed, the government has stopped short of shortening the qualifying periods for all-employee schemes such as SIP and SAYE, an issue of particular concern to businesses with shorter-serving workforces.
Ian Shaw is a share plans specialist at Pinsent Masons and earlier he joined me by video-link to discuss the changes:
Ian Shaw: “Well, I think this is a really important change, Joe. The previous change from £30,000 limit on  CSOPs to £60,000, as at the date of grant, was important, but we didn't quite see the take up that we thought we might. Now, with the doubling again from £60,000 to £120,000, I think that could really get some companies interested.”
Joe Glavina: “So, how could employers benefit from combining CSOP and EMI options under the new rules?”
Ian Shaw: “Well, these limits were always a little bit tricky in their interrelation, and we'd seen some companies even wreck the tax benefits of their EMI by granting some CSOPs. It’s a lot simpler now. These limits can be combined - £250,000 for EMI, £120,000 for CSOP, which is a really good backing that the government's shown to employee share ownership in this country.”
Joe Glavina: “What about HR's role in this? I guess there's a communications piece around this, following the Budget?”
Ian Shaw: “Oh, I think that's absolutely right. I think a lot of lawyers stop at getting it technically right, and I think some companies do too, and then they wonder why they've not got very much employee take up. The best schemes that I've seen put in are ones that are technically correct, obviously, that's a bit of a given, but have been really strongly backed by either a communications agency or in-house, and they've been explained simply to employees, and effectively and I think HR has a huge role in that. Certainly, at Pinsent Masons, we have gone into companies and done town hall presentations alongside key stakeholders, we've done CEO video messages, and we've done the more traditional participant communications on paper, or through a portal. But yes, Joe, I think you're absolutely right, efficient communication to employees, impactful and simple, is absolutely key.”
Joe Glavina: “What are the potential pitfalls for employers introducing or expanding CSOP arrangements?”
Ian Shaw: “The main one I think is probably as regards private companies. I won't get into the technical details - very happy to talk to anyone who would like to - but effectively, when you're setting the exercise price of your CSOP, which must be the market value of a share as at the date of grant, and it can't even be a little bit below, otherwise the CSOP doesn't work so it's absolutely crucial to get that right and to get proper valuation advice there. It’s a slightly different valuation to if you're setting a market value EMI. That sounds like a very technical point, and it absolutely is, but it's absolutely crucial to get right. So do talk to your valuers, do talk to your lawyers, before you launch your CSOP scheme.”
Joe Glavina: “Finally, Ian, many were hoping for some changes to SIPs and SAYE. What are your thoughts on that?”
Ian Shaw: “Yes, it's a bit of a missed opportunity, really. Perhaps the government thought, well, we've done enough for employee share ownership in one budget, and hopefully for the next budget, perhaps even before an election, we will see a change to SIP – SIPs – and SAYE, also known as share save, save as you earn, because to get good tax benefits under those schemes you have to have broadly held the incentive for three years, and to get the best tax benefits for SIPs, you have to have held the shares for five years. Now that's quite a long time, especially for those clients which don't have great employee tenure. Perhaps you're in hospitality or retail, where people perhaps stick around one or two years, and it's a real shame that they can't benefit from these fantastic schemes, which I think enjoy broad cross-party support.”
So, the key message for employers is that the Budget changes offer new opportunities to attract and retain talent through employee share ownership. But getting the schemes right technically, and communicating their benefits effectively to employees, will be crucial. Ian is currently advising clients on the changes and helping them review their share incentive arrangements. If you would like advice on any of these issues, please do contact Ian. His details are there on screen for you.