The Premier League is preparing for a major shake-up in its financial regulations. From the 2026/27 season, the long-standing Profitability and Sustainability Rules (PSR) will be replaced by two new frameworks called the Squad Cost Ratio (SCR) and Sustainability and Systemic Resilience (SSR).[1] This change marks a fundamental shift in how clubs are monitored and could have far-reaching consequences for the game.
How Does it Work?
PSR focused on limiting overall losses, ensuring clubs did not spend too far beyond their means. But the new SCR model takes a different approach. Instead of looking at a club’s total profit or loss, it focused in on a club’s on-pitch spending compared to what it earns from football activities.
So, what does this mean in practice? Under SCR, clubs will have to keep their spending on wages, transfer fees (spread over the length of contracts), and agent commissions within a strict percentage of their football-related income. For teams competing in European competitions specifically the Union of European Football Associations (UEFA) Champions, Europa, or Conference League, that cap will be 70%. For clubs playing only domestically, the limit is slightly more generous at 85%. The idea is to align with UEFA’s financial sustainability programme, but with a key difference, in that UEFA still enforces profitability rules alongside its squad cost controls, the Premier League will focus only on cost ratios.
Sanctions
There will also be a major change in how clubs are assessed for compliance with the new SCR rules and how any breaches are sanctioned. Firstly, the compliance monitoring will be conducted live in season and tested on 1 March with the aim of resolving any breaches in the same season.
Secondly, clubs will also have an extra allowance of 30% before they face any sporting sanctions in the form of points deductions. This allows for clubs to invest and considers the variance of sporting performance throughout a season. For example, having one bad season or doing one bad deal does not immediately lead to a points deduction.
In practice a club that exceeds the 85% limit will face a financial sanction up to the 115% threshold at which point a sporting sanction would be applied.
Financial sanctions are calculated as the amount of overspend multiplied by the percentage above the 85% ratio. For example, if a club overspent by £1,000,000 and its ratio was 95%, the fine would be £100,000 (£1,000,000 x 10%).
The sporting sanction will be a fixed six-point deduction for every £6.5m spent over the higher 115% threshold.
It should be noted that the 30% allowance before a sporting sanction applies does not renew each year and will change depending on a club’s historic level of compliance. So if in season 1 your SCR was 100% (15% above the limit), in season 2 your allowance will only be 15% and a sporting sanction would apply from 100%. For every season the club is then compliant again this allowance will increase again by 10% to the maximum of 30%.
How Could This Impact?
This change introduces new dynamics. Clubs with strong revenues driven by — large global fan bases, lucrative sponsorships, and big matchday income — will have more flexibility to invest in players. Meanwhile, mid-tier clubs could face challenges. Especially those qualifying for the Europa or Conference League will be subject to the stricter 70% cap but earn far less than Champions League participants, leaving them at a potential disadvantage. In short, revenue will become the key driver of competitiveness.
By their design the new rules do not consider non-squad costs incurred by a club such as debt interest. Under PSR, these expenses could weigh heavily on compliance, but SCR removes them from the equation. That could benefit clubs carrying significant financing costs, giving them new breathing room to focus on squad investment.
The Squad Sustainability Rules
Alongside SCR, the Premier League is introducing Squad Sustainability Rules (SSR) — a set of financial health checks designed to prevent clubs from running out of cash. These tests will assess working capital, liquidity, and equity, ensuring that clubs maintain a solid financial foundation even as they manage their squad costs.
The unanimous vote for these rules suggests that the Premier League clubs do not foresee too many issues in complying with them.
Conclusion
The bottom line is that the Premier League is moving from a system that assesses losses to one that controls spending. It’s a bold step in assessing financial sustainability — and it could reshape the competitive landscape for years to come. But fear not, one of our favourite accounting terms you will still hear a lot about is amortisation, which under SCR remains crucial.
© Copyright 2025. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
