Premier League clubs have agreed to introduce new financial controls in time for the 2025-2026 season that will limit the percentage of revenue that can be spent on wages and fees – in place of the current profit and sustainability rules (PSR).

The 20 clubs voted unanimously to introduce the “squad cost controls” which will set an 85 per cent limit on how much annual revenue can be spent on player costs including transfer fees, wages and agents’ fees. The current PSR system has seen points deductions for Everton and Nottingham Forest this season – and PSR breaches are part of the suite of charges against Manchester City and also Leicester City.

The PSR system will continue to operate next season in the Premier League in order to give clubs the opportunity to adapt their business models to comply with the new demands. The squad cost controls will be in place as a shadow model before coming into sole force for the 2025-2026 season.

Currently the PSR system monitors finances over a three-year period, with no club allowed to exceed £105 million permitted losses in that time. Everton successfully argued mitigation in their most recent PSR breach on the grounds they were effectively being punished twice for the same losses. They had already been sanctioned for losses in two of the three years that formed the monitoring period that was the subject of their second PSR breach.

New rules will inform deal with the EFL

The new squad cost controls are expected to offer greater clarity and swifter application of any sanctions. It also brings the Premier League into line with Uefa which is changing to a similar model albeit with a much lower limit of 70 per cent of revenue spent on wages and fees. Given the differences in headline revenue figures between the biggest and smallest clubs in the Premier League it was felt to be unrealistic to expect smaller clubs to remain competitive while spending just 70 per cent of turnover.

The biggest clubs also benefit from greater revenue streams by virtue of participation in Uefa competitions.

The two votes which passed the principle of the squad cost controls and also the transition period are likely to lead to the details of the new system being voted into the handbook at the Premier League AGM in June. With the squad cost controls in place the clubs should now be able to move towards the long-awaited “New Deal” agreement with the Football League (EFL) that is at the heart of the proposed new consensus in English football.

Premier League clubs made it plain that they would not agree any New Deal offer with the Championship – which will take 75 per cent of the payout – unless there were clear rules on how money could be spent both in the top division and the EFL. Last month the clubs declined to vote on a New Deal offer to EFL chairman Rick Parry and his members, thought to be worth around £880 million, until new financial controls were in place.

The Premier League remains concerned that whatever deal might be agreed, Parry will lobby the new government-backed independent regulator for a bigger share of the Premier League revenue.