Premier League's new financial rules explained after clubs voted for six-point penalties

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It is a new set of rules and three letters to get used to: PSR (Profit and Sustainability Rules) will be replaced by SCR (Squad Cost Ratio) from the 2026/27 season after it was voted through in stoppage time.

The 20 top flight clubs voted 14-6 in favour - the minimum required on any rule change - at a Premier League shareholders’ meeting in London. Put simply, a club is allowed to spend 85 per cent of its turnover on squad costs from player transfers, wages, managers and agent fees.

Unlike PSR, the new financial rules focus on what happens on the pitch. That should give clubs greater freedom to upgrade the stadium while commercial and administration staff costs are not included and neither are assistant coaches.

Those in favour of the switch believe SCR will give greater freedom. The six clubs who voted against - Brighton , Bournemouth , Leeds United , Brentford, Crystal Palace and Fulham - clearly do not agree. They may feel it reduces their chances of being competitive.

Fundamentally, it is stop new owners from coming in and buying up the league. That would ruin the competition element of the Premier League. The other aspect of PSR was to stop “another Portsmouth” when, back in the day, the club nearly went under through reckless spending and ownership.

PSR allowed clubs to make a maximum net loss of £115million over any three year period. Everton and Nottingham Forest fell foul of spending rules. They were complex and critics argue it stopped Premier League clubs being able to buy the world ’s biggest stars - even if they could afford them.

The SCR rules allow clubs to spend up to 85 per cent of their turnover on players, managers and transfer costs.

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Yes. But UEFA rules only allow clubs to spend 70 per cent of their turnover and you may remember Aston Villa and Chelsea fell foul in the summer.

How is that fair? Well, the Premier League could argue that being in European competition would give those clubs greater financial reward. And those not in Europe, greater scope to spend more - and get into Europe because they have got an 85 per cent ceiling.

It faced a rebellion and backlash because clubs feared it would effectively bring in a wage cap and the big clubs were wary of facing even tougher restrictions on potential spending.

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Yes. This makes it complicated and less straight forward. While there is an 85 per cent cap, there is a multi-year rolling allowance of up to 30 per cent.

Every club will be assessed on March 1 and and it will be done on annual basis to allow punishment to be imposed that season. Every club will have what the rules describe as a “Green Threshold” of up to 115 per cent.

There will be fine or levy if any club goes above that. But if any club goes beyond the Red Threshold - 85 per cent plus the allowance - will result in a fixed six-point deduction. That will go up by one point for every £6.5m spent over the Red Threshold. Clubs do have the right to appeal.

They will exist in “shadow form” alongside PSR for the rest of the season to allow them to come into full effect from 2026/27.

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