English Premier League installs spending caps from next season
New rules replace PSR with Squad Cost Ratio model
Clubs face sanctions for breaching updated financial limits
The English Premier League has voted to introduce strict spending caps from next season, approving a new financial framework that will limit clubs’ on-field expenditure to 85% of their football revenue and net profit or loss from player trading.
The landmark move ushers in the “Squad Cost Ratio” (SCR) and “Sustainability and Systemic Resilience” (SSR) rules – a sweeping reset intended to stabilise club finances and prevent the controversies seen under the outgoing Profitability and Sustainability Rules (PSR).
New Squad Cost Ratio Replaces PSR
The decision, taken by England’s top-flight clubs on Friday, replaces the PSR system that led to significant points deductions for Everton and Nottingham Forest in recent seasons. The League said the SCR model aligns more closely with UEFA’s framework, bringing England in step with wider European financial standards.
Under SCR, squad costs include player and head-coach wages, transfer fees and agent payments. Clubs may exceed the 85% limit by up to an additional 30%, but breaching that expanded threshold – dubbed the “Red Threshold” – will trigger sporting sanctions, including points deductions. Fines will apply for overspending within the permitted 30% buffer.
The League said the updated approach will “promote the opportunity for all of its clubs to aspire to greater success, while protecting the competitive balance and compelling nature of the League.”
Revenue Rules, Annual Limits Explained
Football-related revenue under the SCR model includes league distributions, prize money, income from other competitions, and club-generated commercial revenue. Net profits from non-football events hosted at stadiums, such as concerts, may also be factored in.
Unlike PSR – which accounted for all revenues and costs and assessed clubs on a rolling three-year basis – SCR imposes clear annual limits and gives clubs “greater freedom to invest in other aspects of their operations,” the League said.
The second pillar of the overhaul, the SSR system, introduces enhanced monitoring of each club’s working capital, liquidity and positive equity. This is designed to support “short, medium and long-term financial sustainability” across the division.
(With AP Inputs)
