Football, as we know it, is on the brink of a major shift. The Premier League Squad Cost Ratio is replacing the old Profit and Sustainability Rules (PSR), bringing in real-time monitoring, hard spending caps, and automatic points deductions that will reshape how clubs operate on and off the pitch.
From the 2026/27 season, Premier League clubs will no longer wait months for independent panels or appeal processes to decide their fate. Instead, how much they spend on wages, transfers, and agents will directly and immediately affect their league position.
This article explains what the Premier League Squad Cost Ratio is, how it works, and what it means for clubs across the table – from title contenders to relegation battlers.
From PSR to a New Era of Financial Control
Under the old Profit and Sustainability Rules (PSR), clubs were told not to lose more than £105 million over three years. If they did, they risked sanctions – but those sanctions often arrived long after the breaches happened.
- Everton received a 10-point deduction in November 2023 for breaches in the previous season, later reduced to six points on appeal.
- Nottingham Forest were deducted four points in March 2024, again for breaches that occurred earlier.
- Chelsea became a symbol of “creative accounting,” moving money around by selling internal assets such as hotels, car parks, and even shifting values across different teams to offset losses.
PSR was widely criticized because clubs could break rules in January and not be punished until the following Christmas. It was reactive, slow, and full of loopholes.
The new framework replaces that with two systems:
- SCR – Squad Cost Ratio: Caps and monitors football-related spending in real time.
- SSR – Sustainability and Systemic Resilience: A financial stress test to ensure clubs can withstand shocks such as relegation or a COVID-type event.
This article focuses on SCR, because that is where the day-to-day reality for clubs changes most.
Green and Red Thresholds: Hard Caps on Squad Spending
At the heart of the system is a hard cap on squad spending, split into two levels – the Green Threshold and the Red Threshold.
Clubs can only spend 85 percent of their football-related revenue, plus any net profit or loss from player sales, on specific football costs. Football-related revenue includes:
- Matchday income
- Broadcasting and commercial income
- Prize money
- Stadium events related to football
- Net gains or losses from player sales
On the cost side, the cap applies to:
- Player wages
- Head coach wages
- Agent fees
- Transfer amortization (the spread-out cost of transfer fees over contracts)
For example:
- If a team earns £500 million in football-related revenue, they can spend £425 million (85 percent) on football-related costs.
- If a smaller club like earns £200 million, they can spend £170 million.
Under PSR, clubs could soften losses with non-football income like selling a hotel. Under SCR, it is strictly about football money. Your spending now scales directly with your football income.
How the Premier League Squad Cost Ratio Changes Club Strategy
Above the Green Threshold, there is a second level called the Red Threshold, which goes up to 115 percent of football-related revenue. This creates a buffer zone:
- 0–85 percent: Green Zone – fully compliant.
- 85–115 percent: Yellow Zone – allowed temporarily but monitored closely.
- Above 115 percent: Red Zone – automatic sporting sanctions.
The buffer allows clubs to:
- Plan long term
- Recover from underperformance
- Make transfers in anticipation of future revenue growth (for example, betting on qualifying for European competitions)
However, if a club crosses 115 percent, the consequences are immediate:
- Instant six-point deduction
- Plus one additional point deducted for every £6.5 million overspent beyond the Red Threshold
For the first time, the Premier League is hard-coding instant points deductions directly into spending rules, rather than relying on slow, case-by-case disciplinary processes.
This means recruitment, wage structures, and contract planning are no longer just financial issues – they are now directly tied to league performance in real time.
Real-Time Monitoring and Instant Sanctions
Another big change under SCR is the move away from a rolling three-year assessment. Instead, clubs are monitored throughout the season with three key checkpoints:
- Monitoring Round – October
- Compliance Test – March 1
- Accounts Confirmation Test – June
At the start of each season, clubs must estimate their football-related revenue for that year. Their costs are tracked against that estimate.
On March 1:
- If football-related costs are under 85 percent, the club is compliant.
- If costs are between 85 and 115 percent, the club falls into the Yellow Zone, faces a June review, and may receive a fine.
- If costs are above 115 percent, the club receives an automatic points deduction in that same season.
Under these rules, clubs like Everton and Nottingham Forest would have received instant deductions in the same season they breached thresholds, instead of living through months of uncertainty.
The Feedback Loop: Overspend Today, Suffer Tomorrow
SCR also introduces a feedback loop that directly links overspending in one season to reduced flexibility in the next.
If a club spends more than 85 percent but no more than 115 percent of football-related revenue (so still under the Red Threshold), their Red Threshold for the next season shrinks by the same margin.
Example:
- Crystal Palace have £500 million in football revenue.
- Their Green Threshold is 85 percent (£425 million).
- If they actually spend 100 percent of that revenue (£500 million) on football costs, they overspend the Green Threshold by 15 percent.
In the next season:
- Their Red Threshold drops from 115 percent to 100 percent.
They now have less room to maneuver. If they overspend again and drift above their new threshold, they risk an instant six-point deduction.
To restore the full 115 percent Red Threshold, a club must:
- Stay below the Green Threshold (85 percent)
- The exact position below 85 percent does not matter; whether they are at 84, 70, or 50 percent, the improvement to the threshold increases gradually up to a maximum margin.
The goal is clear: stop multi-year overspending cycles and force clubs to correct course instead of gambling season after season.
UEFA Alignment and Extra Pressure on European Clubs
The changes do not exist in isolation. UEFA has its own Squad Cost Ratio, which is stricter, capping spending at 70 percent of football-related revenue for clubs in European competitions.
This means that Premier League clubs qualifying for:
- The Champions League
- The Europa League
- The Conference League
must operate under a tighter European cap than the domestic one.
In practice:
- Some clubs would be compliant in the Premier League, but non-compliant under UEFA. These clubs face fines from UEFA if they do not adjust their spending.
- Others, like Aston Villa and Nottingham Forest in the examples given, sit above both the Premier League thresholds and the UEFA cap, creating a double layer of risk.
For these clubs, the options are stark:
- Sell or loan high-earning players, especially in January, or
- Accept fines and prepare for a season of financial austerity.
European qualification now comes with extra financial discipline, not just extra prize money.
No More Creative Accounting and Internal Asset Tricks
One of the most pointed changes in SCR is the refusal to recognize non-football income and internal asset sales as a way to fix football losses.
Under PSR, it was possible to:
- Sell a hotel you already owned
- Move value via car parks or other club assets
- Reassign value across different teams within the club structure
Clubs could break football spending rules, then plug the gap by shifting money around on the balance sheet.
Under SCR:
- Only football-related income counts toward the spending limit.
- Only football-related costs count against it.
If your football operations lose money, your football operations are punished. This closes one of the most controversial loopholes in the old system.
What the New Rules Mean for the Future of English Football
The introduction of the Premier League Squad Cost Ratio marks one of the most significant changes in English football’s financial landscape since Financial Fair Play first appeared.
Key impacts include:
- Immediate sporting consequences for overspending, not delayed sanctions.
- Tighter alignment between financial health and on-pitch results.
- Reduced room for long-term overspending and creative accounting.
- Additional pressure on clubs that regularly qualify for Europe.
Supporters, owners, and executives will have to rethink what “ambition” looks like. Spending big now comes with measurable, predictable risks – not just in the accounts, but in the league table.
In the years ahead, the Premier League Squad Cost Ratio will likely shape transfer strategies, wage structures, and squad building more than any individual signing. Clubs that adapt early may find a competitive edge, while those that gamble on short-term gains could pay a heavy price in points and flexibility.
