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DEFRA have now released full guidance for the 2026 Capital Grants scheme, confirming £225 million of funding to support environmental improvements across England.
Applications are expected to open in July 2026 and will close once funding is fully allocated—meaning early submission will be essential, as funding is not guaranteed even for eligible applications.
What’s included in the 2026 Capital Grants Scheme?
The scheme remains broadly consistent, offering funding across six categories:
Hedgerow planting and restoration
Boundary improvements
Water quality measures
Air quality improvements
Natural flood management projects
Tree and orchard creation or protection works
Spending caps apply: up to £25,000 for water, air and flood management projects, and up to £35,000 for boundaries and tree-related works.
From a compliance perspective, there are some important clarifications in the 2026 guidance. Only one application can be submitted per Single Business Identifier (SBI) each year, and applicants must have full management control of the land for the duration of the agreement. Applications must now be complete at submission, with appropriate documentation, supporting evidence and (where relevant) consents in place.
The grants can be used alongside schemes such as the Sustainable Farming Incentive (SFI) and Countryside Stewardship, making them a useful tool within broader environmental and business planning.
Does Capital Grant funding affect your tax position?
Although grant funding can provide significant financial support, there may also be tax considerations depending on the nature of the project and how funding is received.
Factors that may need to be considered include:
Whether grant income is taxable
Capital allowances treatment
Interaction with existing business structures and reliefs
Taking advice early can help businesses maximise the benefit of available funding while avoiding unexpected tax consequences later.
With applications expected to open in July 2026, now is the ideal time for rural businesses, farmers, and landowners to start reviewing potential projects and preparing the necessary information.
The Capital Grants scheme continues to provide an important opportunity to invest in environmental improvements while supporting the long-term resilience and sustainability of rural operations.
If you are considering applying for Capital Grants in 2026, our agricultural and tax teams can help you understand the tax implications and support your wider planning objectives, please do get in contact.