The government's plan to accelerate the phase-out of direct payments to farmers in England will have a 'huge impact' on many agricultural businesses.

As the government’s budget is reviewed, attention has shifted to the headline measures, including new restrictions on inheritance tax reliefs.

However, one key point that didn’t receive much attention was the acceleration of the reduction in so-called delinked payments, which replaced the BPS earlier this year.

Accountant Saffery warned that this would be 'another blow' to farmers already struggling with changes to agricultural property relief (APR).

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Under the government's post-Brexit agricultural transition plan, 2023 marked the final year of the BPS scheme, and delinked payments began in January 2024.

These payments will be gradually decreased between 2024 and 2027, with no payments due after 2028.

The reduction in payments had been planned through 2024, but further details on the transition from 2025 onwards were awaited.

In the budget, the chancellor confirmed that to ensure ‘funds could be directed to where they are most needed’, significant cuts to delinked payments will now take place starting in 2025.

Martyn Dobinson, partner at Saffery, responded by advising farmers to update their cash flow projections immediately to assess 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 consider how they can bridge the funding gap through other schemes like the Sustainable Farming Incentive (SFI) and by making additional efficiency savings.

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 has stated that the reduced delinked payments will free up funding for environmental land management programs, though the specifics of this plan remain unclear.