The squad cost ratio is a spending control that caps what a club may spend on its playing side as a share of the money football brings in. From 2026/27 the Premier League sets that ceiling at 85 per cent of football revenue and net profit or loss on player sales; UEFA's equivalent, applied to clubs in its own competitions, settled at 70 per cent from 2025/26.
That one fraction now governs how squads are assembled across European club football — soccer, in US usage — because it does not ask whether a club can afford a signing in cash terms. It asks whether the cost of that signing, spread across the contract and added to every wage already on the books, still fits under a line drawn by the club's own income.
What counts as a squad cost?
Squad costs are the money that reaches the pitch, and the definition is narrower than a club's wage bill. In the League's published explanation of the new system, squad costs cover player and head coach wages, agents' fees, and the amortisation or impairment of transfer fees — amortisation being the accounting charge that spreads a fee across the contract's length rather than booking it in the year it is paid. Wages for administrative and commercial staff, and for coaching staff outside the head coach, sit outside the measure — which makes the ratio a control on the first team specifically, not on the size of the business around it.
The denominator is drawn just as deliberately. The Premier League counts football revenue — commercial income, matchday income and central payments including merit money, facility fees and cup income — and, per the League's statement on the new system, net profit or loss on player sales. Including trading profit inside the income line is the detail with the sharpest consequence: a club that develops and sells well does not merely bank a windfall, it raises the ceiling under which its whole squad must fit.
Why is the English ceiling 85 per cent and UEFA's 70?
The two ratios answer different questions. UEFA's is a condition of entry to its competitions; the Premier League's applies to all of its clubs as a domestic licence to spend. Under UEFA's financial sustainability framework, cost control is one of three pillars, alongside solvency and stability, and the squad cost limit was phased in deliberately: 90 per cent in 2023/24, 80 per cent in 2024/25, and a permanent 70 per cent from 2025/26. The Premier League's 85 per cent is not simply looser by 15 points: it is measured against a different income definition and carries its own allowance for overspending.
| Feature | UEFA squad cost rule | Premier League SCR |
|---|---|---|
| Ceiling | 70% from 2025/26 (90% in 2023/24, 80% in 2024/25) | 85% of football revenue and net player-trading result |
| Who it binds | Clubs entering UEFA competitions | All Premier League clubs |
| Headroom above the line | Not specified in UEFA's published summary | Multi-year allowance of 30 percentage points, setting a red threshold at 115% |
| Sanctions | Predefined financial penalties and sporting measures | Levies below the red threshold; points deduction above it |
What happens when a club goes over?
Breaching the line is not one offence with one punishment but a graded scale, and the grade depends on how far past 85 per cent a club goes. The Premier League's explanation sets a green threshold at 85 per cent and a red threshold at 115 per cent, reached by adding the multi-year allowance of 30 percentage points. Spending between those lines draws levies, calculated from the overspend and the percentage by which the club exceeded 85 per cent. Crossing the red threshold moves the case from money to points: a fixed six-point deduction, rising by one further point for every £6.5m spent beyond it.
The calendar matters as much as the arithmetic. Per the League's explanation, the primary compliance test falls on 1 March, with post-season verification in June and final determination by October — so a club is measured while its season is still being played, and again once the accounts close. Full enforcement begins in 2026/27, with levies applying from 2027/28. UEFA states that violations of its squad cost rule trigger predefined financial penalties as well as sporting measures.
Does the older earnings test still apply?
Yes, and conflating the two is the most common misreading of the framework. A ratio limits the share of income a squad may consume; an earnings rule limits how much a club may lose. UEFA runs both, and its football earnings rule treats a club as compliant if it records an aggregate surplus across the monitoring period, or a deficit that stays within what the regulations call the acceptable deviation.
Those thresholds are set out in the acceptable deviation article of UEFA's club licensing and financial sustainability regulations: a base of €5m, rising to a maximum of €60m where the excess is fully covered by contributions or by equity at the reporting date, with a further €10m per reporting period for clubs that clear four financial conditions — positive equity, a quick ratio test, a sustainable debt level and going-concern viability — and are subject to neither a disciplinary measure nor a CFCB settlement. UEFA's explainer notes the ceiling was raised from €30m over three years to €60m when the regulations were introduced, after top-division clubs absorbed €7bn of losses through the pandemic.
Why do the resilience tests matter as much as the ratio?
Because a club can sit comfortably under 85 per cent and still run out of cash in February. Alongside the ratio, the Premier League introduced Sustainability and Systemic Resilience, assessed annually on 7 July and built on three tests set out in the League's explanation: a working capital test requiring a minimum of £12.5m in monthly cash headroom, a liquidity test measured as an £85m stress scenario across two seasons, and a positive equity test capping liabilities against assets at 90 per cent in 2026/27, 85 per cent in 2027/28 and 80 per cent from 2028/29. Failing a test brings no automatic penalty but obliges the club to submit a business plan, with spending limits or enhanced monitoring as available interventions.
How does a ratio change the way squads are built?
Recruitment becomes a portfolio problem rather than a series of individual decisions. Because amortisation spreads a fee across a contract, a long deal lowers the annual charge but locks it in for years, while an impairment — writing down a signing that has lost value — lands inside squad costs rather than sitting apart as a one-off. And because both tests are ratios, spending capacity moves with results: qualification, prize money and cup revenue all raise the ceiling, and losing them lowers it in the season a wage bill is hardest to shift.
Common questions
Is the squad cost ratio a salary cap?
No. A salary cap sets the same cash limit for every club. A ratio scales with each club's own income, so two clubs with very different revenues can both comply while spending very different sums on wages, agents' fees and transfer amortisation.
Does a club breaching the limit automatically lose points?
Not automatically. Under the Premier League's published system, spending between the 85 per cent green threshold and the 115 per cent red threshold draws financial levies. A points deduction — six points, plus one for every £6.5m beyond — applies only once the red threshold is crossed.
What is the acceptable deviation under UEFA's earnings rule?
Per UEFA's regulations, the base acceptable deviation is €5m, rising to a maximum of €60m where the excess is covered by contributions or equity, with up to €10m more per reporting period for clubs meeting four financial conditions and free of disciplinary measures or a CFCB settlement.
For a related football news perspective, read How UEFA's squad cost rule now caps club spending at 70%.