The Premier League has permanently adopted a new financial framework known as squad-cost ratio (SCR) regulations for the 2026-27 season, replacing the previous profit and sustainability rules (PSR) that had governed club spending for years.
The new system, which was trialled on a shadow basis throughout the 2025-26 campaign in both the Premier League and Championship, ties a club's permitted spending on player wages, transfer amortisation and agent fees to a percentage of its total revenue. The move follows a vote among the 20 top-flight clubs, with 14 in favour and six against.
Under the rules, clubs competing in European competitions must adhere to UEFA's existing 70% SCR cap, meaning any Premier League side that qualifies for continental football will need to align its squad costs with that continental ceiling. Clubs that fail to qualify for Europe and compete solely in domestic competitions face a slightly more generous limit, capped at 85% of total revenue.
Crucially, the framework also introduces flexibility through a multi-year rolling allowance of 30%, which clubs can use to spend above the 85% threshold. This allowance is designed to let clubs invest ahead of anticipated revenue growth or absorb the financial impact of unexpected sporting underperformance. Every club will begin the new system with the full 85% plus 30% allowance, giving an effective ceiling of 115% for the coming season.
The mechanism works on a sliding scale tied to prior spending. For example, a club that spends 105% of its revenue on squad costs in 2026-27 will have used 20 percentage points of its 30% allowance, reducing its maximum permitted spend for 2027-28 to 95%. Conversely, clubs that spend below the 85% baseline can rebuild their allowance back up to the maximum 30% for future seasons.
Penalties are structured in tiers. Spending above 85% but within the allowance triggers a financial penalty rather than a sporting sanction. However, if a club exceeds both the 85% baseline and its accumulated allowance, it will face a fixed six-point deduction, which increases by an additional point for every £6.5 million spent beyond the 115% combined ceiling.
A separate concept known as "anchoring," which would have linked all clubs' spending to a multiple of the income earned by the lowest-placed side in the division, was also tested during the 2025-26 shadow period. That proposal was ultimately rejected when put to a vote among Premier League clubs.
Alongside SCR, the league has introduced a companion framework called sustainability and systemic resilience (SSR) regulations, which apply three separate financial tests throughout the season. The working capital test examines a club's short-term cash resources, the liquidity test evaluates medium-term financial resilience, and the positive equity test measures long-term financial health.
Taken together, the SCR and SSR regulations are intended to prevent wealthy owners from injecting unlimited funds into their clubs to finance transfer activity, since such injections are not counted as part of a club's seasonal revenue under the new rules. The regulations are also designed to discourage clubs from accumulating unsustainable losses through excessive spending, addressing concerns that had persisted under the previous PSR system.
The shift marks one of the most significant changes to Premier League financial regulation in recent years, as the league moves toward a model more closely aligned with UEFA's existing squad-cost approach used across European competitions.
Based on reporting from BBC Sport.