SFI in 2026: what Defra’s proposals mean for farm businesses

Defra has now set out the shape of the 2026 Sustainable Farming Incentive (SFI) offering. The headline message is a scheme designed to be simpler and more targeted, with tighter caps intended to  spread the available budget across more businesses while still supporting farms to deliver environmental outcomes alongside food production.

A streamlined list of actions

The most visible change is that SFI26 reduces the number of actions from 102 (under SFI24) to 71, with Defra saying it has removed options that either saw low uptake or delivered limited environmental or productivity benefits.

Defra’s justification is that the point of streamlining is not to reduce overall support, but to focus funding on actions offering ‘the greatest value for food production and the environment,’ and to deliver a scheme that’s ‘simpler, fairer and better‑targeted.’

Application windows in 2026 and who can apply

Defra is planning two application windows. Window one opens in June 2026 and is expected to remain open for around two months, although it may close earlier if the budget for that window is fully allocated.

Window two opens in September 2026 and is open to all farms, with no fixed end date at this stage (although this is likely to be determined once the overall SFI budget is fully allocated).

Window one is reserved for two groups: ‘small farms’ and farms without an existing RPA‑administered Environmental Land Management (ELM) revenue agreement. Defra defines a small farm as up to 50 hectares.

An ‘existing ELM revenue agreement’ includes agreements under previous versions of SFI, Countryside Stewardship Mid Tier, Countryside Stewardship Higher Tier (old and new) and Higher Level Stewardship. It does not include non‑RPA schemes, including private sector schemes or Landscape Recovery.

Defra has also set a minimum eligibility threshold of at least three hectares of agricultural land for SFI26.

Caps and controls aimed at spreading funding more widely

SFI26 introduces an annual agreement value cap of £100,000 and limits each farm business to one SFI26 agreement. Defra says this is about improving fairness and widening participation; it has also stated that around 97% of farms are already below the £100,000 level.

Defra is also introducing controls on how agreements scale after year one of the scheme. Agreement holders will not be able to increase the area or value of rotational actions beyond what was included in the first year, although locations can still change in line with crop rotation. A smaller area may be used in year two (with a corresponding reduction in payment being received) with year three returning to the year one area, but no more. This aims to provide flexibility for crop rotation whilst allowing Defra to retain control of the budget allocated by Westminster.

Separately, Defra is adding AHW7 (Enhanced overwinter stubble) to the existing 25% area limit group (meaning the listed ‘limited area’ actions can’t, individually or together, exceed 25% of a holding’s total agricultural area).

Payments and agreement design: key points to note

Defra says payment rates will continue to follow an ‘income foregone plus costs’ approach, but with targeted changes. It will remove the SFI management payment, describing this as a time-limited measure and saying its removal will free up funding for additional agreements.

For upland farms, Defra is increasing payments for certain moorland actions, including grazing and shepherding rates, and states that the uplift will apply to existing SFI agreements as well as SFI26 agreements.

Defra is also reducing certain payment rates, including CSAM3 (herbal leys), CAHL2 (winter bird food) and CNUM3 (legume fallow). The stated rationale is to recalibrate actions that were ‘set too high’ and could unintentionally encourage  highly productive land to be taken out of production. These reductions will apply only to new SFI26 agreements, not reencourage highly existing SFI23 or SFI24 agreements.

Finally, Defra is converting five-year actions into three-year actions, with the aim of simplifying delivery and making longer-term commitments more workable for short-term tenants. It will also require farmers to apply for base and supplemental actions together, as a single package, and at the same time.