Out with PSR, in with SCR — key takeaways for the Premier League’s new financial era

The Premier League has taken a major step toward reshaping its financial regulation framework, voting to replace the long‑standing Profit and Sustainability Rules (PSR) with two new systems — the Squad Cost Ratio (SCR) and the Sustainability and Systematic Resilience Proposal (SSR) — from the 2026/27 season. 

With exactly 14 of the 20 football clubs voting in favour — the minimum required for any rule change — this shift reshapes spending controls, redefines sustainability assessments and strengthens club accountability. Here, Will Hardwick explores what the new rules mean, how they differ from PSR and what clubs can expect next.

What’s SCR? 

From next season, Premier League clubs will be allowed to spend a maximum of 85% of their revenue on squad costs on a seasonal basis. Those squad costs include head coach wages, player wages, amortised transfers and agents’ fees. Staff outside of the playing squad — such as administrative or commercial personnel — are excluded, as are assistant coaches and other coaching team members. Income relating to women’s teams and youth academies are included in the calculation but costs aren’t, providing clubs with freedom to invest in these areas.

There’s a slight catch, however. For teams competing in UEFA competitions, the limit will be 70% of revenue in line with UEFA’s rules. 

The introduction of SCR brings a degree of alignment with UEFA’s financial sustainability rules. One key difference is that the Premier League’s SCR will run on a seasonal basis rather than UEFA’s calendar-year basis. 

What’s the difference between SCR & PSR?

The SCR calculation will be based solely on clubs’ football revenues. It switches the focus from overall losses to on-pitch spending relative to income. Under PSR, clubs were previously allowed to lose up to £105m over three seasons with the emphasis being on profit and loss and ensuring that clubs didn’t spend beyond their means. 

The Premier League have said that it “enables more timely enforcement and encourages clubs to manage their finances responsibly in real time, rather than relying on longer-term financial balancing”.

Are clubs allowed to go over the 85% threshold?

Yes — clubs can exceed this threshold by up to 30%. The 85% is known as the Green Threshold, while 115% is the Red Threshold.

• If a club breaches the 85%, its allowance the following season will be decreased by the same percentage as the breach. For example, if a promoted team records an SCR of 105%, its Red Threshold the next season will be 95%. This is known as the ‘Feedback Loop’.
• If a club that’s been subjected to a Negative Feedback Loop becomes compliant, it’ll benefit from a Positive Feedback Loop, increasing its Red Threshold by 10%, up to a maximum of 30%.

Sanctions & enforcement

Compliance monitoring will take place in-season and be tested on 1 March. 

If a club’s SCR exceeds the Green Threshold in both the Compliance Test and Accounts Confirmation Test, it’ll face financial sanctions in the form of levies (but no sporting sanctions). The fine is calculated by multiplying the percentage overspend above 85% by the overspend figure. For example, if a club overspent by £2m and its ratio was 90%, the calculation would be 2,000,000 x 0.05 = £100,000.

If a club exceeds the Red Threshold, it’ll face a sporting sanction in the form of a points deduction. This is a fixed six-point deduction that increases by one point for every £6.5m spent over the threshold.

What’s the SSR?

These are a set of tests designed to “improve a club’s sustainability and ‘investability’ over the short-, medium- and long-term”.

The tests are:

• Working Capital Test — a club must demonstrate that, for each calendar month over the course of a season, the sum of its projected cash balances and qualifying working capital funds is at least £12.5m.
• Liquidity Test — a club must demonstrate that, for the current and following season, its 'Liquidity Headroom' is zero or positive having absorbed a 'Stress Test' of £85m.
• Positive Equity Test — a club must demonstrate that its 'Positive Equity Ratio' (liabilities ÷ adjusted assets) is less than or equal to 90% in the 2026/27 season, 85% in the 2027/28 season and 80% from the 2028/29 season onwards.

Each tests take place on 7 July each year. Newly promoted clubs will be assessed on the Liquidity and Positive Equity Tests on October 31.

Asset sale loophole

The Premier League has also closed a loophole that allowed clubs to sell assets to owner-linked companies to artificially boost revenues and remain compliant with PSR rules. Chelsea F.C.’s sale of two hotels and its women’s teams to sister and parent companies are among the most well-known examples.

Key takeaways

1. Clubs will have greater flexibility to invest in off-pitch areas as SCR regulates on-pitch spending only.
2. The aim is to level the playing field by preventing excessive squad spending, though some mid-tier Premier League clubs argue that the new rules could make it harder to compete with the biggest teams.
3. Clubs will need to be more strategic in transfer dealings as squad costs include amortised transfer fees and the previous asset sale loophole has been closed.
4. There are real sporting consequences for overspending.
5. The rules more closely align the Premier League with UEFA.
6. They also support the objectives of the Independent Football Regulator, focusing on sustainability and systemic resilience.

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