SFI Issues

At the time of writing (1st June) there had been no further announcement from Defra on SFI26.  The scheme is due to open in June, for small farmers below 50 Ha and those without any existing agri-environment agreement.  But we are yet to have a precise opening date, indication of the budget available, or full scheme literature.

The second ‘window’ for SFI will open ‘in September’ and will be available to everyone else.  However, there remain many uncertainties around the scheme.  The chart below shows when existing SFI agreements are due to end.  It can be seen that the ‘what comes next’ question is now pressing for quite a large number of businesses with agreements ending in the latter part of this year.  The number of farms requiring a replacement for their existing SFI then accelerates into early 2027.

Those with existing agreements expiring in the winter of 2026/27 may be looking at the September application window to secure a replacement and ensure there is no gap in funding.  Unfortunately, there are a number of issues.  The first is that Defra’s IT systems have always struggled to allow applications whilst an existing agreement is still operating.  Whilst Defra are aware of farmers’ desire to have agreements following seamlessly, the ‘computer-says-no’ problem has yet to be resolved.  This is also an issue for those with Countryside Stewardship agreements (including those rolled-over from last year) that end on 31st December.

Another issue is funding.  We have previously indicated that Defra’s budgetary headroom in 2026/27 looks limited and is likely to restrict the number of new or replacement agreements being offered in the September window.  This is one of the reasons behind the £100,000 per agreement ‘cap’ imposed on SFI26 – to allow the funding to go further.  That figure will be well below what many businesses are currently receiving under their existing SFI agreements.  

This then brings into consideration what happens with SFI next year.  Defra has provided no details on ‘SFI27’.  Indeed, there may be no such scheme, with the SFI26 just opening, with all the same rules, for another application window next year.  Defra has stated that after the last set of SFI changes there will be no more for the lifetime of this Parliament – whether this will actually be the case is, again, unclear.  Whether the SFI26 is deemed to be carrying-on could be important, as one of the new rules is that it is not possible to have more than one SFI26 agreement per SBI number.  Therefore, if an application is made this autumn it could use up farmers’ ‘token’ for future windows.

Another potential reason to delay applications is the £100,000 per agreement cap.  There is no clarity over whether this is just in place for the 2026 year, due to restricted funds, or whether it is now a permanent feature of the scheme.  It is possible that any ‘SFI27’ could see this cap removed or altered.  If the principle behind the SFI is to ‘buy’ environmental improvements from farmers then a cap makes no logical sense – the size of the selling business is immaterial.  However, recent Government rhetoric has shifted to seeing the SFI as more of an income support or social measure – i.e. small farmers are being favoured.  

Some business are already thinking about splitting in order to circumvent the SFI cap.  This is not always easy in practice as the RPA will look at who has ultimate control of each business.  If it is the same owners, then the business will be treated as a single entity.  There are longstanding rules in this area (see https://www.gov.uk/government/publications/rural-payments-if-the-structure-of-your-business-is-changing/separate-business-questionnaire-iacs26-guidance ).

All this uncertainty makes it difficult to plan a way forwards.  If you would like to discuss your options with one of our consultants or would like help in drawing up a scheme, please contact one of our Team members or email [email protected] 

If you found this article useful, there are numerous additional articles published each month on our Professional Update bulletin service. You can access a no obligation 90-day free trial via the link below.