Premier League clubs have agreed a new set of financial regulations to replace the divisive Profit and Sustainability Rules (PSR) with a new Squad Cost Ratio system.
A statement on Friday said Premier League shareholders had voted in favour of the new rules that will come into force for the start of the 2026-27 season.
"Following extensive consultation, clubs agreed to bring in Squad Cost Ratio (SCR) and Sustainability and Systematic Resilience (SSR) proposals," the statement said.
It added that there had been insufficient support for a proposal on Top to Bottom Anchoring (TBA) - a hard cap on clubs' football-related spending set at five times the money earned the previous season by the bottom-placed club in central payments passed on by the Premier League.
Squad Cost Ratio rules will regulate clubs' spending to 85% of their football revenue and net profit/loss on player sales, although clubs will have a multi-year allowance of 30% that they can use to spend in excess of the 85%.
The extra allowance will incur a levy and once it is exhausted clubs will need to comply with 85% or face sanctions.
"The new SCR rules are intended to promote opportunity for all clubs to aspire to greater success and brings the League's financial system close to UEFA's existing SCR rules," the statement said.
UEFA's financial regulations cap a club's spending on player wages, transfers and agents' fees at 70% of their revenue.
Premier League clubs playing in European competitions will still need to meet UEFA's 70% ceiling or face the threat of punishment by the European soccer governing body.
The Premier League said the new rules will allow for transparent in-season monitoring with a club's SCR assessed once a year in March, following the January transfer window.
As well as the SCR system, clubs voted in favour of Sustainability and Systemic Resilience (SSR) rules which will assess a club's short, medium and long-term financial health through three tests -- Working Capital Test, Liquidity Test and Positive Equity Test.
The SCR and TBA systems were used in non-binding trials last season, continuing this term as agreed at the Premier League Annual General Meeting in June 2024.
"This enabled the league and clubs to fully evaluate the system, including the operation of UEFA's equivalent SCR regulations, and to complete the consultation with all relevant stakeholders including the PFA and football agents," the league said.
The existing Profit and Sustainability Rules, which allowed maximum losses of £105million over a rolling three-year period, were introduced in 2015-16 to prevent clubs from reckless spending.
While PSR evaluates a club's overall profit by including all revenues and costs, SCR focuses specifically on on-pitch spending, allowing clubs greater freedom to invest in other aspects of their operations.
Several clubs, including Nottingham Forest and Everton, have fallen foul of PSR, which critics say limit clubs' ability to spend and widen the gulf between clubs with huge revenues and the rest.
PSR will remain force for the rest of the current season.
