Plan the 2026 farm income and tax transition

These three changes have different effective dates and different things you need to do about them. Some are automatic (you don't need to apply for anything); others require action on your part before a deadline.

• 6 April 2026 — APR/BPR inheritance tax reform takes effect: 100% relief capped at £2.5 million combined per person, 50% relief above
• 30 June 2026 — SFI 2026 Window 1 opens (small farms of 50 hectares or less, and/or farms without an existing ELM revenue agreement, minimum 3 hectares)
• 1 August 2026 — 2026 delinked payment issued: maximum £600, down from £7,200 in 2025
• September 2026 — SFI 2026 Window 2 opens (all farmers)
• 1 August 2027 — final delinked payment issued, maximum £600
• 2028 onwards — no delinked payments at all: direct payment income ends completely

Delinked payments are calculated from your historical reference amount, not from anything you do now. The first £30,000 of your reference amount is subject to a 98% reduction in 2026 and 2027, and anything above £30,000 receives nothing. That caps every farm's delinked payment at £600 a year for 2026 and 2027, regardless of how large your original Basic Payment Scheme claim was. From 2028, delinked payments stop entirely.

Work out your own numbers before you plan anything else: find your reference amount in the Rural Payments service, and compare what you received in 2023 (the final BPS year) with your capped £600 for 2026-27 and £0 from 2028. That gap is the income you need to replace, primarily through SFI 2026 or Countryside Stewardship.

The reformed Sustainable Farming Incentive is the main replacement income stream. SFI 2026 offers 71 actions with a £100,000 cap per agreement year, and only one agreement per business - a deliberate change from the previous version, which allowed layering multiple SFI agreements. Window 1 opens 30 June 2026 for small farms (50 hectares or less) and farms without an existing ELM revenue agreement; Window 2 opens in September 2026 for all farmers.

If you need funding before your SFI window opens, or you have land requiring more specialist management (SSSIs, commons), Countryside Stewardship Higher Tier is available now and does not wait for the SFI calendar - but it requires mandatory pre-application advice from Natural England or the Forestry Commission, so start that conversation early.

From 6 April 2026, the 100% inheritance tax relief available on agricultural and business property (Agricultural Property Relief and Business Property Relief combined) is capped at £2.5 million per person. Above that, relief drops to 50%, which works out as an effective inheritance tax rate of 20% on the excess, rather than the standard 40%. The allowance is fully transferable between spouses and civil partners, so a couple can structure their affairs to pass on up to £5 million combined with full relief.

This is a significant change from the £1 million figure originally announced - the government raised the allowance to £2.5 million on 23 December 2025 following sector pressure. If your farm's qualifying assets are comfortably under £2.5 million per person, the practical impact may be limited, but you should still get a current valuation and check your will is structured to use both spouses' allowances. If you are above that threshold, this needs proper professional planning.

Each part of this transition has its own record-keeping expectations. Keeping these current protects you if HMRC, the RPA, or Natural England later ask questions.

• Rural Payments account — confirm your reference amount and keep your bank details, business name, and contact information current so delinked payments and any SFI payments reach you without delay.
• Land mapping and management plan — if you plan to apply for SFI 2026 or Countryside Stewardship, prepare your land mapping and management plan ahead of the application window rather than starting from scratch when it opens.
• Farm valuation — instruct a RICS or CAAV agricultural valuer to establish your current agricultural value and business asset value, separating APR-qualifying and BPR-qualifying assets. This is the starting point for any succession planning conversation.
• Will and partnership agreement review — check your will (and partnership agreement, if you farm in partnership) reflects the new £2.5 million transferable allowance and how you want assets to pass.
• Income and cost modelling — record your historical BPS/delinked income against your projected scheme income and cost base, so you have evidence for lenders, land agents, or advisers reviewing your business plan.