Capping brings new dynamic to payments

Despite the name change from the Basic Payment Scheme (BPS) to the new Farm Sustainability Transition Payment, there really is no material difference in area-based schemes this year.

However, once the new Farm Sustainability Payment (FSP) is fully rolled out in 2026, it will come with a number of significant changes, including a proposal by DAERA to apply a cap.

It is not a new concept, with NI the only part of the UK to put a cap on BPS money since 2015, effectively limiting this payment to £190,000 per farm business. The new limit applied to the FSP is less generous. It is a progressive cap that starts out at £60,000, and is to be implemented over a two-year period.

In Year 1, there is a 10% reduction between £60,000 and £80,000, a 20% cut between £80,000 and £100,000, a 30% reduction between £100,000 and £150,000 and a 40% reduction between £150,000 and the £190,000 limit. In effect, the maximum FSP a farm business can receive in 2026 is £153,000.

Pot of money

From Year 2 onwards, each of the percentage deductions are doubled, so the maximum FSP becomes £116,000.

However, it is important to note that the pot of money for the FSP is after deductions are made to fund beef schemes (up to 17%) and potentially new agri-environment schemes (Farming With Nature).

In their calculations, DAERA estimates that after the 17% is removed, only 265 farm businesses would have payments above £60,000.

It is a relatively low number, but many of these farmers are active in the land market each year as they look to secure sufficient area to claim entitlements. Will their appetite for land be reduced once a cap is in place and might some look to downsize and trade entitlements?

The FSP cap will bring a new dynamic to entitlement trading and that is before we consider the impact of DAERA plans to exclude over 2,000 landowners from 2026 onwards, who will have little option but to sell their entitlements next year.

Either way, there will be a ready market, given that all land (outside of hard features) will become eligible to claim entitlements in 2026, bringing in an extra 40,000ha.