What SFI offers and how to decide what's right for your business

There are several actions that eligible farm businesses can look at to put themselves in a position to apply under the Sustainable Farming Incentive (SFI) 2026 – as outlined in our previous article. This includes ensuring that land is correctly registered and reviewing how SFI might fit within wider business plans.

Defra is yet to confirm when exactly window one will open in June (limited to farms between 3-50 hectares, or farms not currently entered into any live Environmental Land Management scheme), but it is sensible for interested applicants to plan for entry windows before they open.

With those foundations in place, the next step for land mangers is to understand how SFI operates and decide what is write for your business. The full guidance for SFI 2026 has not yet been published, but the structure and delivery of earlier versions of the scheme provide an indication of how agreements should work in practice, alongside new information about actions available in 2026. This is particularly relevant for applicants who may not have before considered SFI in previous rounds and to those smaller farms considering entry into the June application window.

SFI is built around a set of individual actions which can be selected and combined across a holding to fit that business. Rather than entering a single whole-farm scheme, land managers are able to select from a menu of available actions which are most suited to the farming system. These can be across chosen areas of the land holding, subject to specific eligibility requirements on land types (covered in our previous blog) and limits on some actions covered in the section below on SFI 2026 specifically.

This approach allows agreements to be tailored to the farm. Land does not need to be entered in its entirety, and actions can be applied to specific parcels or areas depending on what fits within the existing system.

For smaller farm businesses, this flexibility is significant. It enables selective participation, allowing land managers to engage with SFI at a scale that reflects their operational capacity and priorities. Defra has indicated that it will put out guidance on which SFI actions will be most suitable for small farms, and the CLA recommends signing up to the Defra Farming Blog to ensure you receive updates when further official guidance is released.

At the time of writing, for 2026, all SFI agreements will be for a three-year period (subject to the agreement continuing through the full period of its lifetime), and this should be considered when determining applicability of entering into the scheme. Once an agreement is in place, actions are expected to be delivered over that three-year term.

Some actions operate on a rotational basis, meaning they move around the farm during the agreement period, and applicants will need to submit both annual declarations for funding payment and rotational declarations if these actions are included in the scheme.

Importantly, for SFI 2026 there is little scope to adjust agreements. In particular, under SFI 2026, in order to increase the visibility of budget through all three years of an SFI agreement, Defra has now prohibited altering the area or value of rotational action. This will not be able to increase beyond what is declared in the first year, although locations can still move to reflect cropping and areas can be decreased to reflect changes in field sizes.

This reinforces the importance of selecting actions that can be sustained operationally over the full three-year agreement.

Payments under SFI are based on standard rates for each action, which are paid on a quarterly basis, providing a predictable and consistent income stream. Earlier versions of the scheme also included additional elements, such as management payments. However, these are no longer included under SFI 2026.

Payment rates are set nationally and are intended to reflect typical costs and income foregone associated with delivering each action. They are not tailored to individual farm circumstances. Each farm business will need to make a decision based on their own circumstances.

Assessing the value of SFI requires consideration of how payments interact with the wider business. Key factors include the opportunity cost of land, particularly where actions involve reduced output or changes in land use. The role of SFI income in providing stability and diversification may also be relevant, particularly for smaller farms seeking to balance income streams.

Although SFI allows flexibility in the amount of land entered, it is important for applicants to understand that eligibility for the scheme requires a business to have at least three hectares of agricultural land. This minimum amount is an eligibility requirement for entry, but does not mean that SFI applications themselves need to have at least three hectares of scheme actions.

SFI 2026 actions will continue to cover a range of management practices, with actions broadly looking to alter direct farming practices to be more sustainable (such as enhanced overwinter stubble), improve general management practices (such as the management of hedgerows) or remove land from standard farming practices (such as grassy field corners or blocks). Understanding what is required and the management actions necessitated under each action is important to consider when reviewing a scheme’s applicability to a certain holding.

Complete scheme guidance is still to be published, but there is information already available which will shape how agreements are designed for the June application window.

For SFI in 2026, there will be a total of 71 actions to be chosen through for applicants. Defra has indicated that actions have been removed where uptake was limited or where they delivered less for environmental outcomes or food production, with the intention of creating a more focused and accessible scheme. Defra is yet to publish the updated list of actions on the action finder page, however, previous guidance on the scheme actions can be found on the SFI 2024 scheme information. Defra has indicated that some wording will change between previous SFI schemes and 2026, so applicants are strongly encouraged to review SFI 2026 action guidance when it is released.

Alongside this, a number of new limits and controls have been introduced:

• A cap of £100,000 per agreement year and a limit of one agreement per farm business – the CLA continues to strongly lobby Defra on the inclusion of a flat agreement value limit, and urges any CLA members affected to reach out to jack.chivers@cla.org.uk to discuss the impact of the cap
• A requirement for applicants to have at least three hectares of agricultural land to be eligible
• All actions moving to a three-year agreement length (in previous SFI schemes, some actions were for a five-year term)

There are also specific constraints on how land can be entered into certain actions. Ten actions are subject to a 25% area limit, meaning they cannot (individually or in combination) cover more than a quarter of the farmed area. This is intended to avoid large proportions of land being taken out of production. These actions are:

• CIPM2/IPM2: Flower-rich grass margins, blocks or in-field strips
• CAHL1/AHL1: Pollen and nectar flower mix
• CAHL2/AHL2: Winter bird food on arable and horticultural land
• CAHL3/AHL3: Grassy field corners or blocks
• CIGL1/IGL1: Take improved grassland field corners or blocks out of management
• CIGL2/IGL2: Winter bird food on improved grassland
• WBD3: In-field grass strips
• AHW7: Enhanced overwinter stubble
• AHW9: Unharvested cereal headland
• AHW11: Cultivated areas for arable plants

Rotational actions are fixed at the level declared in year one to allow Defra and the Rural Payments Agency (RPA) more control over the budget throughout an agreement’s lifetime. This reinforces the importance of initial agreement design.

In some cases, payment rates have also been adjusted to reflect changes in costs and priorities, with a continued focus on balancing environmental delivery with food production.

Window one of SFI 2026 will open in June and is targeted specifically at small farms (up to 50 hectares) and those without an existing RPA administered agreement, with a limited application period and defined budget. Additionally, new entrants and those who have not before interacted with the RPA in any manner will need to be aware of the requirement for businesses to have been registered with the RPA before 1 January 2026 and have some agricultural land associated with them. Although this is to minimise cases of new business - and therefore Single Business Identifier (SBI) numbers – being set-up to minimise implications of the £100,000 agreement value limit, the RPA and Defra are aware that this will preclude a number of applicants who have not yet set up an SBI from applying in the first June window.

Taken together, these changes mean that while the overall structure of SFI remains familiar, there is a greater emphasis on careful planning at the outset, particularly for smaller farms entering in the first window.

Along with CLA support, which members are urged to take advantage of in the lead-up to the SFI windows opening, there are a number of advisory and digital services that have emerged which can help applications and ongoing agreement management.

Services, such as that provided by Just Farm, Land App and support provided through land agents and rural advisers can assist with mapping, action selection and ensuring compliance with agreement requirements.

The final article in this series will move from scheme design to how SFI operates in practice once an agreement is in place, helping members prepare for delivery and engagement. This series is intended to support members ahead of a CLA webinar in June, where these issues will be explored in more detail.

The Defra Farming Blog: Read and subscribe

Defra action finder page: Find funding for land or farms

2024 Scheme Action: Read the archived page