Premier League clubs have voted to replace Profitability and Sustainability Rules with a new framework built around Squad Cost Ratio and Sustainability and Systemic Resilience from 2026/27, while rejecting a controversial Top to Bottom Anchoring cap.
The Premier League has approved a sweeping overhaul of its financial rulebook, with clubs voting to replace the divisive Profitability and Sustainability Rules (PSR) with a new system built around Squad Cost Ratio (SCR) and Sustainability and Systemic Resilience (SSR) from the 2026/27 season, while rejecting a hard “anchoring” cap on spending.
At a shareholders’ meeting on November 21, clubs signed off on SCR and SSR after a two-year consultation and live trials, but there was “insufficient support” for the Top to Bottom Anchoring (TBA) proposal which had been heavily criticised by the Professional Footballer’s Association (PFA) and several leading clubs.
PSR will remain in force for the rest of the 2025/26 season, with the league stressing that it retains the power to pursue any existing or historic breaches even after the new framework takes effect.
Shifting from losses to live spending caps
Under the new system, Squad Cost Ratio becomes the central control on football spending.
- Caps on pitch spending at 85% of a club’s “football-related revenue” plus net profit or loss on player trading.
- Covers player and head coach wages, agents’ fees and the amortisation or impairment of transfer fees. Assistant coaches and wider staff are omitted from the cap.
- Applies on a seasonal basis, with in-season tests and end-of-season confirmation, rather than PSR’s rolling three-year loss calculation.
The league argues that focusing on squad costs rather than overall profitability will “secure financial sustainability” while giving clubs more freedom to invest in areas such as stadiums, fan experience, women’s teams and academies, whose costs are excluded from the SCR calculation.
Income from those teams and operations counts towards revenue, but their expenses do not, which effectively incentivises investment off the pitch.
The Premier League also presents SCR as a way to reduce PSR’s uncertainty and delay, with compliance monitored and enforced “in season” rather than years after the spending has occurred.
Green and red thresholds, feedback loops and points deductions
The mechanics of SCR are highly structured.
At the start of each season, the league and each club agree projected football revenues. These figures set two key markers:
- A Green Threshold at 85% of projected revenue.
- A Red Threshold initially set 30% higher at 115% representing the outer limit of permitted squad spend.
For example, Manchester United’s revenue for 2024/25 was £666.5m. Under the new rules if they were to be implemented this season, United would only be allowed to spend £566.525m.
Clubs face a Compliance Test on 1 March after the winter window, and an Accounts Confirmation Test in June, comparing projections with actuals, with further monitoring in October for clubs above 85%.
If a club’s SCR:
- Stays at or below 85 per cent, it is compliant and faces no action.
- Sits between 85 per cent and its Red Threshold, it may be liable for a levy after the season but avoids sporting sanctions.
- Exceeds the Red Threshold, it incurs a points deduction in the same season, starting at six points, rising by one point for every £6.5m overspent beyond that red line.
The 30% “headroom” above 85% operates as a multi-year allowance. If a club breaches 85% in the confirmation test, its allowance is reduced by the same margin the following season. A side that records a 100% SCR in season one would see its allowance fall from 30% to 15% for season two. Repeat breaches eventually exhaust the allowance and bring the club straight into the sanction zone.
There is also a positive feedback loop. Clubs that have had their allowance cut can rebuild it in 10% increments in later seasons if they return to compliance, up to the 30 per cent ceiling. Unused headroom cannot be rolled forward as extra spending capacity.
SCR will fully apply from 2026/27, but levies for overspending only start to bite from 2027/28, giving clubs a year to adapt while still facing the threat of points deductions for serious breaches.
SSR: stress-testing clubs against shocks
Running alongside SCR, Sustainability and Systemic Resilience (SSR) introduces three tests aimed at short-, medium- and long-term financial health:
- Working Capital Test – clubs must show that each month their projected cash plus qualifying working capital facilities is at least £12.5m, ensuring day-to-day obligations can be met even if results or revenues dip.
- Liquidity Test – over the current and following season, clubs must maintain a non-negative “Liquidity Headroom” after applying an £85m stress test representing potential hits such as relegation, loss of a major sponsor or missing out on European football. The test includes 40 per cent of the market value of player registrations as a liquid asset.
- Positive Equity Test – clubs’ Positive Equity Ratio (liabilities divided by adjusted assets) must be at or below 90% in 2026/27, 85% in 2027/28 and 80% from 2028/29, with full squad market value (or higher book value) counted as an asset and all liabilities, including shareholder loans, included.
Clubs will be assessed on SSR each July 7, with extra “call-in” reviews possible if concerns arise during a season or material events occur. Newly promoted sides are given slightly different timelines for some tests, reflecting their step up from EFL revenue levels.
Where clubs fall short, the emphasis is on corrective measures such as spending limits, cash injections or debt restructuring, backed by enhanced monitoring. Only if a club fails to produce or comply with a viable plan does the Premier League reserve the right to escalate to registration restrictions or disciplinary powers.
Anchoring voted down after backlash
The most contentious element of the package – Top to Bottom Anchoring – will not be implemented.
TBA would have limited the total a club could spend on wages, transfer fees and related costs to a multiple of the central Premier League payout earned by the lowest-earning club, widely reported as five times that figure.
The idea was sold as a way to narrow the gap between the top and bottom of the league, but it attracted fierce opposition. The Professional Footballers’ Association (PFA) warned it would function as a de facto salary cap and had signalled a willingness to pursue legal action on restraint-of-trade grounds.
Similarly, major agencies and several elite clubs, notably Manchester United and Manchester City, argued it would undermine their ability to compete with the biggest European sides and could be vulnerable under UK competition law.
Today (November 21), the proposal was voted down, with reports indicating 12 clubs against, seven in favour and one abstention, clearing the way for SCR and SSR to proceed without a hard anchoring cap.
Alignment with UEFA and the Independent Football Regulator
The league has been explicit that the new system is designed to sit “in parallel” with UEFA’s financial regulations and to be consistent with the objectives of the newly created Independent Football Regulator (IFR).
UEFA already operates its own Squad Cost Ratio, capping relevant spending at 70% of total revenue for clubs in European competitions. Premier League sides that qualify for UEFA tournaments will still have to satisfy that stricter ceiling, while domestic-only clubs can operate up to 85% under the Premier League rules.
The IFR, created under the Football Governance Act 2025, has a mandate to protect the financial soundness and resilience of clubs and to safeguard the heritage of the English game. It will run a licensing regime and has powers to intervene where financial or governance risks emerge.
What the changes mean for clubs
- High-revenue clubs will effectively have larger absolute squad budgets, since the 85 per cent cap is applied to their own income, rather than a fixed pound-value limit, reinforcing the importance of commercial growth.
- Clubs with more volatile sporting performance gain some protection, thanks to pre-agreed revenue inputs and the multi-year allowance that lets them “spend ahead of revenues” for a time, although repeated over-spending will quickly erode that cushion.
- Newly promoted sides will see their revenue assumptions uplifted to reflect Premier League income, with the same 30 per cent SCR allowance applied, but must still meet SSR thresholds on working capital, liquidity and equity within specified timeframes.
- Investment in women’s football and youth development is structurally encouraged, as associated revenues help the SCR calculation while the costs are excluded from the squad-cost denominator.
