Wildlife, nature and the climate will benefit from the biggest shake-up in farming policy in England for 50 years, according to government plans.

The £1.6bn subsidy farmers receive every year for simply owning or renting land will be phased out by 2028, with the funds used instead to pay them to restore wild habitats, create new woodlands, boost soils and cut pesticide use.

The wealthiest farmers – those receiving annual payments over £150,000 a year – will face the sharpest cuts, starting with 25% in 2021. Those receiving less than £30,000 will see a 5% cut next year.

Some of the biggest recipients of the existing scheme have been the Duke of Westminster, the inventor Sir James Dyson, racehorse owner Prince Khalid bin Abdullah al Saud and the Queen.

Farmers will also get grants to improve productivity and animal welfare, including new robotic equipment. The goal of the plan is that farmers will – within seven years – be producing healthy and profitable food in a sustainable way and without subsidies.

The environment secretary, George Eustice, acknowledged the damage done to the environment by industrial farming since the 1960s and said the new plans would deliver for nature and help fight the climate crisis. Farming occupies 70% of England, is the biggest driver of biodiversity loss and produces significant greenhouse gas emissions and water pollution.

The radical changes in agricultural policy are possible due to the UK leaving the EU, whose common agricultural policy is widely regarded as a disaster for nature and even critics of Brexit see the changes as positive.

Farming and environment groups largely welcomed the plans but said more detail was urgently required. Brexit is looming at the end of December and uncertainties remain over food tariffs and trade deals. Many groups are also concerned about the potential import of food produced to lower animal welfare and environmental standards.

“This is the biggest change in agricultural policy in half a century,” said Eustice. “It makes no sense to subsidise land ownership and tenure where the largest subsidy payments often go to the wealthiest landowners.

“Over the last century, much of our wildlife-rich habitat has been lost, and many species are in long-term decline.

“I know many farmers feel this loss keenly and are taking measures to reverse this decline. But we cannot deny that the intensification of agriculture since the 1960s has taken its toll. Our plans for future farming must also tackle climate change – one of the most urgent challenges facing the world.”

The total of £2.4bn a year currently paid to farmers will remain the same until 2025, as promised in the Conservative manifesto. Currently, two-thirds of this is paid solely for owning land, but the proportion will fall to one-third by 2025 and zero by 2028. Funds for environmental action will rise from a quarter of the total to more than half by 2025, with the remaining funds used to increase productivity.

The new green payments will be trialled with 5,000 farmers before a full launch in 2024. But the level of payments for work such as natural flood defences and restoring peatlands and saltmarshes has not yet been set. Nor has the likely cut in carbon emissions been quantified.

The president of the National Farmers’ Union, Minette Batters, said: “Farming is changing and we look forward to working with ministers and officials to co-create the new schemes.”

But she added: “Expecting farmers to run viable, high-cost farm businesses, continue to produce food and increase their environmental delivery, while phasing out existing support and without a complete replacement scheme for almost three years is high risk and a very big ask.”

The cuts are expected to reduce the income of livestock farmers, for example, by 60% to 80% by 2024, Batters said.

Kate Norgrove, of the WWF, said: “Our farmers have the potential to be frontline heroes in the climate and nature emergency, and this roadmap starts us on the right path. It must see increased investment in nature as a way to tackle climate change.”

Tom Lancaster, principal policy officer for agriculture at the RSPB, said: “This is a make or break moment for the government’s farming reforms, which are so important to both the future of farming and recovery of nature in England. This plan provides some welcome clarity, but faster progress is now needed over the coming months.”

But Craig Bennett, CEO of the Wildlife Trusts, said: “We are deeply worried that the pilot environment schemes simply cannot deliver the promise that nature will be in a better state. Four years on from the EU referendum, we still lack the detail and clarity on how farm funding will benefit the public.”

Other measures in the government plan include funding improvements in how farmers manage animal manure – slurry is a major polluter of both water and air – and a scheme where farmers seeking to leave the sector can cash out all the subsidies payments they are due up to 2028 in 2022, part of efforts to help new farmers enter the sector.

The government said it would be cutting “red tape” for farmers, with warning letters replacing automatic fines for minor issues and more targeted – though not fewer – inspections.

In July, the government said rules about growing diverse crops, fallow land and hedges would be abolished in 2021, claiming they had little environmental benefit. Farming policy is a devolved matter and other UK nations have yet to bring forward firm new plans.