Sustainable Farming Incentive 2026: Headline Details Announced
Following the announcements by Environment Secretary Emma Reynolds at the NFU Conference yesterday, Defra has released the headline details for the Sustainable Farming Incentive (SFI) 2026 in England.
The revised offer, which will open in a phased approach this summer, introduces a leaner structure, recalibrated payment rates, and a £100,000 annual payment cap. The government has stated these changes aim to distribute funding more fairly across farm businesses and ensure that productive land is not unnecessarily taken out of food production.
Here is our summary of the key changes and what they mean for farm and estate management.
A Streamlined Scheme and £100,000 Cap
The SFI 2026 offer has been slimmed down from 102 actions to 71. Defra has removed several actions that previously demonstrated low uptake, poor value for money, or failed to deliver direct environmental outcomes.
Crucially, new structural and financial limits have been introduced which will require careful planning for larger enterprises:
- £100,000 Annual Cap: Agreements will be strictly capped at £100,000 per year per farm business.
- One Agreement Per Business: Each farm business will be restricted to holding just one SFI26 agreement.
- Base and Supplemental Actions: Under a new rule, farmers applying for SFI26 will only be able to apply for a base action and its supplemental action together, in the same agreement, at the same time. They can no longer be split.
- Management Payment Removed: The £50/ha SFI management payment—originally introduced to support the administrative burden of transitioning into the new scheme—has been scrapped entirely.
- Minimum Land Threshold: Implementing the “Active Farmer Principle”, applicants must now hold a minimum of 3 hectares of eligible agricultural land to qualify.
Adjusted Payment Rates and Area Limits
To deter highly productive arable land from being taken out of food production, payment rates for some of the highest-demand actions have been reduced, for example the following reductions have been announced:
- Herbal Leys (CSAM3): Reduced from £382/ha to £224/ha.
- Winter Bird Food (CAHL2): Reduced from £853/ha to £648/ha.
- Legume Fallow (CNUM3): Reduced from £593/ha to £532/ha.
Conversely, payment rates for Moorland actions have been increased to better reflect current pressures in the livestock market. It is important to note that these rate reductions will not be applied retroactively to existing SFI23 or SFI24 agreements.
Area restrictions have also been tightened. Agreement holders will not be able to increase the area of rotational actions beyond their Year 1 commitment. Furthermore, Enhanced Overwinter Stubble (AHW7) has now been added to the 25% total farm area limit.
Application Windows
To manage administrative capacity, Defra is rolling out the scheme across two application windows:
- June 2026 (Window 1): Open exclusively to smaller farms (under 50 hectares) and farm businesses that do not currently hold an Environmental Land Management (ELM) revenue agreement.
- September 2026 (Window 2): Open to all other eligible farm businesses.
Wider Funding Announcements
Alongside the SFI updates, a £345 million funding package was announced to boost farm productivity and infrastructure:
- Capital Grants: A new round of ELM Capital Grants will open in July 2026, backed by a 50% increased budget of £225 million for infrastructure such as hedgerows, slurry storage, and natural flood management.
- Farming Equipment and Technology Fund (FETF): £50 million is available for technology that improves productivity and animal welfare. The application window opens shortly on 17 March 2026.
- Farming Innovation Programme: £70 million has been allocated to support practical research and development, including the ADOPT programme which opens in April.
Next Steps
For larger estates and farming enterprises, the £100,000 cap, the 25% area limits, and the removal of the management payment will necessitate careful prioritisation of actions to maximise environmental and financial outcomes within the permitted ceiling.
With the Basic Payment Scheme virtually gone, the SFI remains an essential income stream for building business resilience. We highly recommend using the time ahead of the application windows to review your current cropping plans, update your RPA land cover data, and model the financial impact of the revised payment rates.
If you need assistance navigating the new SFI26 options, assessing how the financial caps affect your farm, or preparing a grant application, please contact us for further information.
Michael Sills