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The Sustainable Farming Incentive reopens in June, and a lot of the coverage has focused, understandably, on what is in the new scheme: 71 actions rather than 102, a £100,000 annual cap, two application windows, lower payment rates on a handful of arable favourites. Useful as that is, it misses where the real risk and opportunity sit for farm businesses this summer. SFI26 is not really an annual decision dressed up as a scheme. It is a three-year commercial commitment whose ceiling is fixed by what you put down in Year 1, and whose flexibility you spend in the first application window rather than the cropping years that follow.
That distinction matters, because most of the businesses I talk to are still thinking about SFI in the rhythm of the schemes that came before it. Under SFI23 and the expanded SFI24 offer, you could come back and add land. You could open another agreement alongside the first. You could move into rotational actions as the year unfolded and you saw how cropping was going. SFI26 closes all three of those doors at once. One agreement per farm business. A hard £100,000 annual cap. And, crucially, the area or value of rotational actions cannot exceed what was committed in Year 1. You can move them between fields, you can drop down in Year 2 and come back up in Year 3, but you cannot push beyond the Year 1 line. The first application sets a ceiling that lasts the full three-year term.
What changes when Year 1 becomes the ceiling?
It changes the order in which the planning has to happen. Under the previous scheme, a farm could apply for what it was confident about and add to it as the year settled. Under SFI26, the only way to give yourself room is to model the full three-year position before you submit and apply on that basis, accepting that some of the headroom will go unused in the lower years. Under commit in Year 1 and you have given up income for the term. Overcommit and you risk compliance strain on land you cannot reasonably deliver against. Neither error is recoverable mid-agreement.
That is a different exercise from the one most farms have done at application stage in recent years. It draws in the cropping plan, the rotation, the realistic delivery capacity, the fixed costs sitting against each block of land, and a view on where the business expects to be by 2028. It is closer to a budget than a grant form. The advisers I find most useful in conversations with clients at the moment are the ones who have stopped treating SFI as an administrative exercise and started treating it as a piece of the farm's financial planning, in the same conversation as borrowings, contractor costs and the slow tapering of delinked payments.
Does the cap actually bite?
Defra has been clear that 97 per cent of farms with live SFI agreements are already under the £100,000 cap, and on that basis the cap is mostly symbolic. That is true at population level and not very useful for any individual business sitting close to the line. Where it does bite, it bites hard. A mixed arable holding that has historically run agreements above £100,000 has only three options: scale the action mix down to fit the cap, sit out the scheme for parts of the holding, or restructure the business so that the land sits across more than one farm business with its own Single Business Identifier. The last option is not something to be done lightly or as a tax dodge in another coat. It needs to make sense on its own terms, with its own management, accounts and economic substance, or it is asking for trouble at audit and elsewhere. But it is a question worth raising at the planning stage rather than discovering after the fact.
For most owner-managed farms in the £5 million to £25 million turnover bracket the cap will not be the binding constraint. The binding constraint will be Year 1 rotational area and the interaction with the 25 per cent whole-farm limit that now catches enhanced overwinter stubble alongside the existing pollen and nectar mixes, winter bird food, grass margins and field corners. Stack these as you might have done in 2024 and you can find yourself bumping against the limit without realising it.
Window 1 or Window 2?
The two-window structure has been presented as a fairness measure, and broadly it is. Small farms under 50 hectares and businesses without an existing ELM revenue agreement go first, in June. Everyone else applies from September. The practical effect, though, is that the businesses with the most complex planning to do are also the ones with less time to do it. A grower coming off a Countryside Stewardship Mid Tier agreement at the end of 2026, for example, has to decide between a one-year rollover that protects continuity and a September application that risks a funding gap if Window 2 closes early. Defra has indicated that new functionality may allow applications against expiring agreements before they end, but that has not yet been confirmed, and a business cannot plan its 2027 budget on a feature that may or may not exist.
For arable businesses there is a further practical wrinkle. Starting an agreement in June, midway through the cropping cycle, is awkward. The Year 1 commitment has to be made before the autumn drilling decisions that will shape what is actually deliverable on the ground. There is no clean way around that this year. The honest answer is to model two or three credible scenarios for the rotation, identify the floor of what can be committed with confidence across all of them, and apply on that basis. Resist the urge to apply for everything that fits the eligibility rules. The cost of overcommitting in Year 1 is not just compliance risk; it is three years of being held to a number that the business cannot comfortably deliver against.
What about the reduced payment rates?
The cuts to herbal leys, winter bird food and legume fallow have had a lot of attention, particularly the 41 per cent reduction on herbal leys, from £382 per hectare to £224. The temptation is to look at the headline rates and conclude the action mix should shift. In some cases it should. In many cases it should not, because the agronomic case for the action has not changed and the alternatives carry their own costs. A herbal ley that fits the rotation and earns its place on soil structure grounds is still earning its place at £224 per hectare; it just earns less of it. The question to put to the action mix is whether each action would still be on the farm if the payment were not there, and whether the residual payment covers enough of the establishment and management cost to justify the commitment. That is a different question from “is the rate still good.” On some land it will be both; on other land it will be neither.
The point
SFI26 is being described in the trade press as a reset, a simplification, a tidier offer. From a scheme design perspective that is fair. From a farm business perspective it is something else: a three-year commercial commitment with most of its flexibility front-loaded into a single application window, and a budget pool that may close before all eligible businesses have applied. The farms that do well out of it will be the ones that treat the Year 1 application the way they would treat any other three-year capital commitment, with a proper modelling exercise behind it rather than a list of actions ticked off against the rules. The farms that struggle will be the ones who treat it as paperwork and find, eighteen months in, that the ceiling they put down in June 2026 was set in the wrong place.
This article has been prepared for information purposes only. Formal professional advice is strongly recommended before making decisions on the topics discussed in this release. No responsibility for any loss to any person acting, or not acting, as a result of this release can be accepted by us, or any person affiliated with us.
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