The government's continued phase-out of direct payments to farmers in England will be accelerated, causing a 'huge impact' on many farming businesses.
As the dust settles on the government's budget, thoughts gravitated towards the headline announcements of restrictions on inheritance tax reliefs.
But one point that went under the radar is the speeding up of the decline in so-called delinked payments that replaced the BPS earlier this year.
Accountant Saffery said this would be 'another blow' to farmers, who are already reeling due to changes to agricultural property relief (APR).
Under the government's post-Brexit agricultural transition plan, 2023 was the last year of the BPS scheme, and delinked payments replaced it since the start of 2024.
These will be gradually reduced from 2024-2027, and no further amounts will be payable from the year 2028.
The phased reduction in the payments had been announced through to 2024, but news was awaited on what the phasing out would look like from 2025 onwards.
In the budget, so that "funds could be directed to where they are most needed", the chancellor confirmed that significant restrictions to delinked payments would now be applied in 2025.
Responding to this, Martyn Dobinson, partner at Saffery, has urged farmers to revisit their cash flow forecasts and projections 'as soon as possible' to quantify the impact.
He explained: “For those who would have received a payment of more than £30,000 in 2025, anything exceeding £30,000 will be reduced to nil. Any amount up to £30,000 will be reduced by 76%.
“In practice, this means that the maximum delinked payment amount receivable in 2025 will be £7,200."
Farmers should also explore how the funding gap might be plugged through accessing other available schemes, such as the Sustainable Farming Incentive (SFI), as well as through further efficiency savings.
Mr Dobinson added: “The impact of this on cash flow for many farming businesses will be huge, and it will come as an unexpected and unwelcome surprise.”
Defra have said that the reduction in the delinked payments will increase funding available for environmental land management schemes.
However, it is not yet known what that will look like in practice.
