Farm Subsidies, Delinked Payments and SFI
Written and reviewed by the Agricultural Accountants editorial team. Last reviewed 27 July 2026.
Farm support in England changed shape completely. The Basic Payment Scheme has gone, replaced first by delinked payments that are being cut to nothing, and by environmental schemes that pay for what you do rather than for the acres you hold. The tax treatment is the part that gets overlooked.
The headline point is simple: these payments are taxable income, and they arrive in years when the trading profit may be thin.
Delinked Payments Are Winding Down
Delinked payments replaced the Basic Payment Scheme in England in 2024, and they are being reduced hard. For 2026 and 2027 the reduction is 98% on the first £30,000 of payment, and 2027 is the last year they are paid at all. The RPA guidance confirms the figures and that the payments end after 2027.
The same guidance confirms they are taxed as income of the farm business. So a payment that is shrinking each year still has to be declared, and it lands whether or not the trading year was any good.
SFI and Stewardship Are Taxable Too
The Sustainable Farming Incentive and Countryside Stewardship pay for environmental land management. Where the land is still farmed, HMRC treats those receipts as part of the farming trade, so they are taxable trading income, as set out in its technical note on ecosystem services.
This surprises farmers who think of an environmental payment as separate from the business. It is not: it goes through the accounts and is taxed like any other farm income, and it needs recording alongside the diminishing delinked payment.
Devolved Schemes and Timing
Support is devolved, so the picture differs by nation. Wales is replacing its Basic Payment Scheme with the Sustainable Farming Scheme from January 2026, with the old payments phased out to 2029. Scotland has kept direct payments longer and is moving to its own framework. The tax treatment as farm income is the same, but the scheme you are in, and when payments land, differs.
The timing matters because subsidy income can push a year into a higher band, which is exactly where averaging, covered in our guide to profit averaging and the herd basis, earns its place.