There’s a familiar resilience in farming, but even the most robust businesses are feeling the strain. Over the past 18–24 months, high fuel and fertiliser prices have not just squeezed margins, they’ve forced a rethink of how farms operate, invest and plan ahead. At the same time, the wider rollout of the Sustainable Farming Incentive 2026 (SFI26) from September brings another set of commercial decisions. With the first application window already open and the scheme becoming available more widely, farmers need to consider not simply which actions they can enter, but how SFI26 fits alongside the productive and financial needs of the farm.
Fuel and fertiliser have always been volatile, but this feels more sustained. Costs remain high against historic averages while output prices have softened in some sectors, steadily eroding profitability. Cutting back has been the natural response. Reduced applications, delayed investment and tighter control over overheads are all sensible in the short term, but the risk is that repeated cost-cutting starts to affect productivity, soil health and long-term output. The real question is not just where to save, but where to continue investing.
While profitability is often measured annually, the real strain is showing in cash flow. Higher upfront costs mean more working capital is tied up earlier in the season, increasing reliance on borrowing or stretching existing facilities. When combined with delayed or uncertain income, this creates a tightening cycle. Regular cash flow forecasting across the farming year allows earlier, more informed decisions, whether that’s restructuring finance, reviewing capital spend or reassessing enterprise mix. In the current environment, timing matters.
We’re seeing more businesses take a sharper view of input efficiency. Precision farming, nutrient planning and soil analysis are becoming essential rather than optional. Targeted investment in these areas can reduce waste and protect yield, helping to offset rising input costs.
SFI26 is now under way, with the first application window having opened at the end of June for smaller farms and businesses without an existing Environmental Land Management revenue agreement. From September, Window 2 is expected to open the scheme to all eligible farmers and land managers.
The revised scheme has been designed to be simpler and more targeted, with actions covering areas including soil health, nutrient management, integrated pest management, precision farming, water management and farmland wildlife. For farmers with qualifying environmental agreements approaching their end, new arrangements for Window 2 will also allow some businesses to begin an SFI26 application before their existing agreement expires.
That makes it an important part of forward planning, but SFI should still be considered within the economics of the whole farm. Payments can provide a valuable income stream and some actions may complement changes that a business already wants to make, such as improving nutrient efficiency, soil health or reducing reliance on expensive inputs. However, an SFI payment alone does not necessarily make an action commercially right for the business.
The starting point should therefore be to understand what each option means for land use, productive output, costs and cash flow. With SFI26 agreements subject to scheme rules and limits, including a maximum annual agreement value of £100,000 per farm business, farmers should consider the overall return rather than simply maximising the number of actions entered.
Decisions made now could influence how land is managed for several years. Aligning scheme participation with the longer-term objectives of the farm will therefore be just as important as the level of payment available.
The perceived trade-off between productivity and sustainability is narrowing. Reducing reliance on expensive inputs, improving soil health and building resilience all support both environmental and financial outcomes. The challenge is managing that transition without creating short-term strain, which requires a whole-business view. Looking at decisions in isolation can be misleading. Understanding how enterprises, land use and income streams interact gives a clearer picture.
Recent weather conditions have reinforced just how quickly the assumptions behind a farm budget can change. Input costs, policy, weather and markets can all alter the financial picture during the course of a season. Resilience therefore comes from being able to assess the impact early and respond from a position of knowledge rather than simply reacting to events.
SFI decisions should also be considered alongside the wider tax and succession position of the farm.
Payments received under environmental land management schemes will form part of the financial picture of the business, while changes to the way land and other assets are used may have wider tax consequences. Importantly, Agricultural Property Relief has been extended to qualifying land managed under environmental land management agreements, so entering an eligible environmental scheme does not in itself mean that Agricultural Property Relief will be lost.
However, this should not remove tax from the decision-making process. The wider structure and activities of the farming business remain relevant, particularly when considering Business Property Relief and succession planning.
This is especially important following the changes to Agricultural Property Relief and Business Property Relief that took effect from 6 April 2026. With a combined £2.5 million allowance for qualifying agricultural and business property receiving 100% relief and qualifying value above that generally receiving relief at 50%, succession planning has become an even more important part of the wider farm strategy.
SFI participation should therefore be considered alongside land use, business structure, ownership and long-term succession plans rather than as a standalone environmental decision.
All data and figures referred to in our news section are correct at the date of publishing and should not be relied upon as still current.
