Premier League Replaces PSR: Full Breakdown of the New Squad Cost Ratio and SSR Rules for 2026/27

In 2013, the Premier League introduced the so-called Profitability and Sustainability Rules, which are better known colloquially as PSR. For the new 2026/27 season, the Premier League will replace PSR with two new rules. These will be called Squad Cost Ratio (SCR) and Sustainability and Systemic Ressilience (SSR). In this article we want to explain the new regulations as well as the associated changes. We have already explained La Liga’s Squad Cost Limit in another article and analyzed the values of each club (you can find the article here).

What were the Premier League’s PSR rules and why they are being replaced?

To understand the changes to PSR, in this paragraph we briefly explain the currently valid Profitability and Sustainability Rules. The Premier League’s profitability and sustainability rules limit clubs to a maximum loss of £105 million (currently equivalent to approximately 120 million euros) over a three-year period, which corresponds to £35 million per season. If a club was in the Championship for one season during this period, the loss limit is reduced to £22 million for each season. As an example, Burnley FC will receive a limit of £92 million as they compete in the Premier League this season but had to spend a season in the Championship last season following relegation in 2023/24. The Premier League also does not take the real loss as a value, but allows losses in certain deduction areas. These include investments in infrastructure, youth academy or women’s football, which, even as joint projects, do not have to be included in the loss calculation. Transfer fees are written off over the duration of the respective player’s contract. Buys Manchester United Matheus Cunha for 80 million euros and gives him a contract for 4 years, so the transfer fee will be spread over 20 million euros. Chelsea FC took this as an opportunity to give players the longest possible contracts, sometimes up to 8 years, in order to stretch the losses in transfers for as long as possible and minimize them per year. The Premier League then adjusted the rules and now allows a maximum depreciation period of 5 years.

Penalties for non-fulfillment by clubs have so far varied widely, ranging from fines to point deductions. Everton FC received the heaviest penalty to date, having been deducted a total of 8 points in the 2023/24 season (divided into two penalties, one 6 and one 2 points deduction), as these had exceeded the permitted 105 million pounds in the period up to 2021/22 and 2023/24 with 20 million and 16.6 million pounds respectively. But Nottingham Forrest, for example, also received points deducted, while the remaining penalties remained fines.

How the new Squad Cost Ratio (SCR) works: Thresholds, penalties and club impact

Before we discuss what the new Squad Cost Ratio is and how it works, the reasons for switching from PSR to the new rules. The Premier League says that the rules have been changed mainly to bring them closer to UEFA rules. UEFA has its own rules, the Financial Sustainability Rules, which (unlike PSR) are limited to expenditure on the squad. In principle, these state that only 70% of all income may be spent on the squad (for example, transfer fees, salaries or consultant fees). They apply exclusively to teams participating in European competitions and ensured that Premier League teams that were represented at European level in a season were additionally regulated in their expenses by this rule.

The Squad Cost Ratio is based on the same metric as UEFA’s Financial Sustainability Rules. From the 2026/27 season, the Premier League will allow all teams to spend 85% of their football-related revenue on so-called „on-pitch donations“. In this context, football-related revenue refers to all funds raised by clubs, including advertising revenue, matchday revenue and even net profits from events in their stadiums, such as: concerts. This also includes the funds distributed to clubs by the Premier League, FA or UEFA (prize money and TV money). On-court expenses include all costs for player and coach salaries, consultant fees, and transfer fees. It is also again permitted to write off transfer fees over the term of a player’s contract and even to state a player’s depreciation there. For example, if a player is bought and injured, then the player’s club can include the transfer fee in the calculation to a lesser extent.

The SCR is calculated per season, while UEFA’s rules refer to the calendar year. Before a season, clubs each give a projected value for the 85% of football-related revenue (this is based on past balance sheets), which is called the Green Threshold. In addition, a red threshold is set, which is 30% higher than the permitted expenditure. On March 1st of each season, the Premier League checks where the clubs fit in. If a club is within the Green Threshold, he has nothing to fear. If it is above the Green Threshold but within the Red Threshold, the respective club must undergo a review after the end of the season in June. The club’s balance sheets are examined in detail. If the club is still above the Green Threshold but within the Red Threshold, the total amount is multiplied by the percentage points and thus a penalty amount is calculated, which the club must pay to the Premier League. For example, if a club exceeds the limit by 1 million pounds, which is 5% higher than the permitted 85%, it must pay a fine of 50,000 pounds (£1,000,000 x 0.05). If a team exceeds the red threshold, the club receives a point deduction of a fixed 6 points. For every £6.5 million the club is further above the red threshold, another point is deducted.

Each club is granted a multi-year allowance, which allows them to exceed the green threshold. This multi-year allowance is calculated in the following steps. For example, if a club is promoted to the Premier League, it starts with a Green Threshold of 85% and a Red Threshold of 115%. If he now spends 95% of his football-related income, his allowance in the Red Threshold will be reduced by the percentage of the overrun from the previous season. In this case, that means he keeps the green threshold of 85%, but his red threshold drops to 105%. This can be done until the red threshold is also at 85%. But clubs can also increase the Red Threshold again. If the club in our example is 5% below its Green Threshold in the following season, this 5% is added to the following season’s Red Threshold, which would increase it to 110%.

Understanding the new SSR Rule: Financial stability tests every club must pass

The Sustainability and Systemic Resilience (SSR) rule will also be introduced from the new season. This rule ensures that all Premier League clubs are assessed for their short-term, medium-term and long-term economic viability. To determine this, a working capital test, a liquidity test and a positive equity test are conducted. These three tests are conducted every July 7 of the year, while promoted teams do not have to pass them until October 31.

The working capital test assesses whether the club has enough immediately available cash over a season to cope with necessary expenses and unforeseen fluctuations (for example during a transfer window). Each club must demonstrate that it has a cash balance or qualified working capital fund of at least £12.5 million for each individual calendar month of a season. He must be able to access these cash funds at short notice within 28 days. This can also be ensured with the help of unused credit facilities or other receivables.

The liquidity test ensures medium-term liquidity and resilience. It examines each club’s liquidity margin over two seasons. This is intended to ensure the clubs’ ability to act in the event of unplanned shock events. Examples include relegations, loss of key sponsors or non-payment of television money. To demonstrate that the club’s liquidity margin is large enough, all liquid assets and liabilities are offset and a stress test amount of £85 million is added to the liabilities. The club must still achieve at least a value of 0 or a positive value to pass the test. The Premier League can also set the stress test figure higher for individual clubs if the financial impact of defaulting payments (such as relegation or missing European competitions) is higher than £85 million. 40% of the club’s squad value is also added to the liquid assets.

The final test tests long-term financial health with a test for positive equity. The balance sheet of each club is evaluated to determine that the clubs are operating without high debts and are prepared for extreme events (such as a global pandemic). Each club must have a positive equity ratio of 90% in the current season, a ratio of 85% in the following season, and 80% in the following season. The equity ratio is calculated using liabilities + adjusted assets. The total squad market values or the net book values of the players flow, whichever is higher. The calculation also takes into account all liabilities shown in the association’s balance sheet, including shareholder loans and foreign debt.

If an association fails the tests, it either has the option of voluntary measures, such as. B. voluntary spending restrictions, external cash injections, a realignment of debt/equity positions or he receives strict conditions from the Premier League. However, the SSR has no further consequences like the SCR with point deductions or fines. It is intended more as a protection for the clubs so as not to get into financial difficulties.

What the new rules mean for Premier League clubs: Key takeaways and early impact

For clubs, this means that the rules are clearer and align with UEFA rules. This makes it particularly easier for European Cup participants to comply with the rules. At the same time, this will likely ensure that clubs can spend more money. However, this can only be speculated at present and will become apparent as soon as the rule comes into force next season. In general, the rule is easy to understand and also makes it easier for fans to understand how the rules work. The new SSR in particular will ensure that Premier League clubs cannot face financial difficulties in the future. It will be exciting to see how the Premier League strikes the balance between financial security and sporting integrity. La Liga is solving this with special rules that are not yet known in the Premier League.