Squad Cost Ratio: the Premier League's new money rules

On 21 November 2025, fourteen of the Premier League's twenty clubs voted to change the money rules. Fourteen was exactly the minimum needed to pass a regulatory amendment: not a vote to spare. That bare majority fixed the system that governs the league from 2026-27, the Squad Cost Ratio (SCR), and put a date on the retirement of the Profitability and Sustainability Rules, the PSR that in 2024 left Everton and Nottingham Forest fighting the drop with points taken off them.

The two eras are worth keeping apart, because most of the noise written about English football's financial rules mixes a system that no longer exists with one that has barely started. PSR was the rulebook until the end of 2025-26 and remains the framework against which breaches from those accounting periods are judged. SCR governs everything from 2026-27 onwards.

What PSR was and why it hit its limit

PSR measured losses, not spending. A club that had spent all three seasons of the assessment period in the Premier League could lose up to £105 million in aggregate. If part of that three-year window had been played in the Championship, the ceiling dropped: £83 million with one season outside the top flight, £61 million with two. On top of that, only a fraction of those losses could come out of the club's own pocket; the rest had to be underwritten by the owners through share purchases, the so-called secure funding.

The problem was structural. PSR looked backwards, at accounting periods already closed, and the punishment landed when the side that had overspent was a different side altogether. The cases were slow, too. Leicester City's was referred to an independent commission in May 2025, the hearing ran for a week in November, the ruling was published on 5 February 2026 and the appeal was not resolved until 8 April. Almost a year between charge and final sanction, with a squad and a coaching staff bearing no relation to the ones that had run up the shortfall.

How the Squad Cost Ratio works: the 85% and the 30% buffer

SCR does not look at losses. It looks at a proportion. It divides squad cost by the club's football revenue and demands that the result stays at or below 85%. It is the same logic the North American leagues and UEFA use, and it shifts the conversation away from the balance sheet towards a far more direct question: how much of what comes in is going straight back out on football?

The numerator takes in player and head coach wages, agents' fees, and transfer amortisation or impairment. Administrative staff, the commercial department and assistant coaches are all excluded. The denominator holds commercial revenue, gate receipts, central league payments and cup income - FA Cup, EFL Cup, UEFA competitions and the Club World Cup - adjusted for the net result of player trading. Selling well therefore still helps: not because it plugs a hole, but because it enlarges the denominator.

That 85% is the green threshold. Above it sits a multi-year buffer of 30% that puts the red threshold at 115%. The cushion is neither infinite nor free: it is eaten into whenever the club goes past 85%, and it is restored at a rate of 10% for each compliant accounting period. The snapshot is taken on 1 March, right after the winter window, with an additional check in October.

The changeover was not immediate. SCR was meant to arrive earlier, but in February 2025 the clubs voted to keep PSR for one more season and the new system ran alongside it, in shadow mode, measuring without punishing. That trial period is why the clubs came into 2026-27 with a rough idea of where they stood.

From a fine to a points deduction: six and rising

Between the green and red thresholds the sanction is financial: a charge proportional to the excess, calculated on how far past 85% the club has gone. It is a toll, not a sporting punishment. The club pays and carries on competing with the same points total, which turns the middle band into a business decision. Overspending has a price, and that price is known in advance.

Crossing the red threshold changes the nature of the thing. There the rules set out a fixed deduction of six points, rising by one point for every £6.5 million spent above that limit. That is the most important difference from PSR: the number stops depending on a commission's case-by-case judgement and starts coming out of a formula.

And what exactly is a points deduction? It is not a deferred fine or an asterisk on the final table. The points come off the live standings immediately, they show up in the following weekend's table and they apply retrospectively to matches already played and won. A side can go to bed fourteenth and wake up in the relegation zone without kicking a ball. There is a route of appeal to an independent board, which can uphold the sanction, reduce it or even increase it.

The precedents: Everton, Nottingham Forest and Leicester City

All three English deductions on financial grounds were resolved under the old system, not under SCR. It is the most common confusion around them, and it is worth nailing down before running through the cases.

Everton were docked ten points on 17 November 2023: their PSR calculation came out at £124.5 million of losses over the period ending in 2021-22, which is £19.5 million above the £105 million ceiling. On 26 February 2024 an appeal board cut the punishment to six points. Weeks later, in April, the club picked up two more for a second breach, this time over the three-year period ending in 2022-23, which went past the limit by £16.6 million. Eight points in total inside a single season.

Nottingham Forest lost four points on 18 March 2024. Their threshold was not £105 million but £61 million, because two of the three seasons assessed had been played in the Championship, and they went over it by £34.5 million. The club appealed and the deduction was upheld.

The comparison explains why the old system generated so much argument: Nottingham Forest exceeded their limit by a good deal more money than Everton did and received fewer points. Under PSR the size of the punishment was discretionary and turned on aggravating factors, mitigation and how far the club had cooperated during the case. Two similar breaches could end up miles apart.

The most recent case is Leicester City's. On 5 February 2026 a Premier League commission handed them a six-point deduction for breaching the EFL's profitability rules in 2023-24, with an excess of £20.8 million over the applicable threshold; the club was also criticised for failing to hand over its annual accounts when required to. The sanction was served in the Championship, because by then the side had already gone down. Both club and league appealed, one asking for fewer points and the other for more, and on 8 April 2026 the appeal board dismissed both. Leicester were relegated to League One later that same month.

What the new system does not solve

SCR does not travel alone. A second block comes with it, the Sustainability and Systemic Resilience rules (SSR), built on three tests: short-term working capital, medium-term liquidity and positive net equity over the long term. There is no automatic sanction here. A club that fails a test has to submit a business plan showing how it will return to compliance, and only if it does not does the door open to spending restrictions, enhanced monitoring or disciplinary proceedings.

The most aggressive proposal fell at the same vote: anchoring, a spending cap tied to five times the central broadcast revenue of the bottom-placed club. It was rejected by twelve votes to seven with one abstention, with the players' union and the agencies threatening legal action over its resemblance to a salary cap.

And one awkward asymmetry remains. Clubs in European competition are also bound by UEFA's squad cost rule, which is stricter: 70% of revenue, applied in full from 2025-26. An English club in Europe therefore lives with two different ceilings, one domestic and one continental, and in practice the lower one wins. Two sides in the same league can be playing under different spending rules depending on whether they finished fifth or seventh the year before.

"Under PSR a club was judged on what it had lost; under SCR it is measured on what it can afford."

As things stand, no club has been sanctioned under SCR: the first real check falls on 1 March, already inside the 2026-27 season. Until then the only verifiable things are the deductions handed down under the old system, and the feeling, widespread among supporters, that the table is no longer settled on the pitch alone.

If what interests you is how a table moves when the results change, that you can test in one click. The simulator hands out points on the grass: it does not model financial sanctions or administrative deductions.

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