How the Premier League's new spending cap actually works

The Squad Cost Ratio is a spending control that limits how much a Premier League club can spend on player and head-coach wages, transfer amortisation and agents' fees to 85% of its football revenue plus net profit or loss on player sales, replacing the Profit and Sustainability Rules from the 2026/27 season, per the Premier League's own statement on the new financial system.

Clubs voted to approve the rule in November 2025 after a period in which the old Profit and Sustainability Rules — a three-year loss cap applied across the whole club, on and off the pitch — had produced repeated points deductions and prolonged tribunal disputes. The new system narrows the scope of what regulators actually measure: instead of total club losses, it isolates squad spending against the money the squad itself helps generate, and checks that ratio on a rolling basis rather than waiting three years to find out a club has overspent.

What exactly counts as squad cost?

Squad cost is defined narrowly: player and head-coach wages, agents' fees, and the amortised or impaired cost of transfer fees, according to the Premier League's explainer of the new financial system. Administrative staff, commercial personnel, and assistant or academy coaching staff are excluded from the calculation, which keeps the rule focused on the money spent putting a matchday squad on the pitch rather than running the club as a whole. Revenue from a club's women's team and youth academy counts toward the revenue side of the ratio, but the associated costs are excluded — a deliberate carve-out the league says is meant to leave clubs free to keep investing in both without it counting against their spending room.

How does the allowance system work?

Clubs are not simply cut off the instant they cross 85%. The system builds in a buffer — initially set at 30 percentage points above the threshold, creating an effective "red" line at 115% of football revenue — before sporting sanctions apply, per the Premier League's explainer. That buffer moves over time: it shrinks for a club that breaches the 85% line in a given season and grows back, by up to 10 percentage points a year to a maximum of 30, for a club that stays compliant. The league checks the ratio on a rolling calendar — a primary assessment on 1 March, after the January transfer window closes, with further monitoring in October and end-of-season verification in June and October.

What happens if a club breaks the threshold?

Below the 85% line, a club faces no action at all. Between 85% and the 115% red threshold, the consequence is a financial levy rather than a sporting penalty, and a club that stayed compliant in the previous two seasons can reduce that levy through what the league calls a "levy offset mechanism," per the Premier League's statement. Only above 115% do sporting sanctions apply, starting with a fixed six-point deduction and rising by a further point for every £6.5 million of overspend beyond that line. The league has said levies themselves will not actually be enforced until the 2027/28 season, giving clubs a year of the new system operating before money changes hands over a breach.

How does this differ from UEFA's version?

UEFA runs a parallel, stricter version of the same idea across its own club competitions. Its squad cost rule caps spending on player and coach wages, transfers and agents' fees at 70% of club revenue at full implementation, according to UEFA's published financial sustainability regulations — well below the Premier League's 85% ceiling. UEFA phased its version in gradually: a 90% threshold in the 2023/24 season, tightening to 80% in 2024/25, and settling at the permanent 70% ceiling from 2025/26 onward. UEFA's regulations state that breaches "will result in predefined financial penalties as well as sporting measures," without detailing the exact scale of those penalties beyond that general framework. The gap between the two thresholds — 85% domestically against 70% in Europe — means a Premier League club spending freely at home can still find itself constrained the moment it qualifies for European competition, since UEFA's tighter cap applies on top of the league's own rule.

What is the Sustainability and Systemic Resilience test?

Alongside the Squad Cost Ratio, clubs approved a second framework called Sustainability and Systemic Resilience, which checks financial health over three different time horizons rather than spending alone, per the Premier League's explainer. A Working Capital test requires clubs to hold at least £12.5 million in projected cash and qualifying funds each month, covering short-term shocks such as a lost sponsor or a sudden player exit. A Liquidity test requires clubs to show positive headroom after an £85 million stress scenario is applied across the current and following season, counting 40% of a squad's market value as a liquid asset. A Positive Equity test sets a minimum equity ratio — 90% in 2026/27, easing to 85% in 2027/28 and 80% from 2028/29 — intended to stop clubs running on unsustainable debt.

Why did the anchoring proposal fail?

A third proposal, a "Top to Bottom Anchoring" measure that would have tied the very top of Premier League spending to a multiple of the money earned by the bottom club, did not get enough support when clubs voted, per the Premier League's statement on the new financial system. The Squad Cost Ratio and Sustainability and Systemic Resilience frameworks passed; anchoring did not. The 2025/26 season is running as a "shadow" year in which the Squad Cost Ratio is tracked without being enforced, with the old Profit and Sustainability Rules remaining the binding standard until Squad Cost Ratio enforcement begins in full for 2026/27.

For a related tactics perspective, read How the video assistant referee actually reviews an offside call.