The one-sentence version
A Championship club may spend no more than 85% of its income on players and managers, transfer fees included, and an owner may lift that allowance with up to £33m of equity over three years, capped at £15m in any one season. Go over and the first sanction is a transfer embargo; persist and an independent panel can take points.
What it replaced, and why that matters
Until this season the Championship ran Profitability and Sustainability: a cap on losses, £39m across three years, tested long after the fact. That design produced the division’s defining absurdity, clubs being punished in one season for money spent in another. Birmingham City took a points deduction in March 2019 for a breach in a cycle that had already closed. Under the new rules the test runs in real time, through the season, so an embargo lands in the window that caused it rather than eighteen months later.
Championship clubs approved the change by 20 votes to 4 in May and shadow-ran it through 2025/26. This is the first season it counts.
How it differs from the Premier League’s version
Both leagues call their rule a squad cost ratio and both set the line at 85%. That is where the similarity stops.
| EFL Championship | Premier League | |
|---|---|---|
| The line | 85% of income, flat. No Championship club is in Europe, so there is no second tier of limit. | 70% for clubs in UEFA competition, 85% for everyone else. Qualifying for Europe tightens the rule by fifteen points. |
| Room above it | £33m of owner equity over three years, maximum £15m a season. Cash, put in by the owner, and finite. | A 30-point multi-year allowance. Not cash: ratio. Using it incurs a levy, shrinks the allowance by the size of the breach, and it rebuilds at 10 points a season of compliance. No owner top-up exists in the PL rule at all. |
| What counts as cost | Player and manager costs, including transfer fees, amortised across contract length. | Player and head-coach wages, transfer amortisation and impairment, agent fees. Not the wider staff bill. |
| What counts as income | An adjusted revenue base, designed so a one-off windfall cannot buy a season’s spending. | Football revenue plus net profit or loss on player sales, which is why selling an academy graduate moves the ratio twice. |
| When it is tested | Real time, during the season, with the Club Financial Reporting Unit watching as it happens. | Assessment on 1 March, with an October checkpoint and year-end verification in June and October. |
| What a breach costs | Transfer embargo first, then a points deduction set by an independent panel on the scale and persistence of the breach. | A financial levy between the green and red lines; above the red line a fixed six-point deduction, rising by one point per £6.5m of overspend. |
The distortion the rule does not fix
Because the cap scales with income, and income in this division is handed out unequally by design, the 85% line is not one line. It is twenty-four of them.
A club relegated from the Premier League receives parachute payments: 55% of a Premier League equal share in year one, 45% in year two, 20% in year three. For 2026/27 that is roughly £55m each to West Ham, Wolves and Burnley in their first year down, and roughly £40m to Southampton in their second. A club without one receives EFL solidarity, a fraction of that. Same rule, same percentage, and an allowance that differs by tens of millions before a ball is kicked.
This is not a side effect the rules overlooked. It is the arithmetic the rules are built on, and it is why the Championship’s own clubs split 20–4 rather than voting the change through unanimously.
Registration: the other rulebook
Spending is one constraint; who may actually play is another. A Championship club registers a squad of 25 players over 21, of whom at least 8 must be homegrown, meaning three seasons, or 36 months, at a club affiliated to the FA or the FAW before the season in which the player turns 21. It is a registration test, not a nationality test: a player of any passport who came through an English academy is homegrown, and an England international who did not is not.
Players born on or after 1 January 2005 are under-21 for 2026/27 and play without occupying a place, provided they are on a permanent contract. Loanees are the exception that catches clubs out: a loaned-in player must be registered whatever their age, so a young loan signing consumes a squad place that the same player on a permanent deal would not.
What this means for reading the numbers
Championship accounts are filed later, in less detail, and often by a holding company whose figures are not the football club’s alone. Transfer fees between EFL clubs are usually undisclosed. Where a figure on these pages is derived rather than filed, it says so. Where a whole club’s latest year is not public, the page says that too, rather than quietly projecting over the gap.
See it applied
Every club page works these numbers through for a real squad, with the sources and the caveats attached.
Questions
What are the EFL Championship’s Squad Cost Rules?
From 2026/27 a Championship club may spend no more than 85% of its income on player and manager costs, including transfer fees. The rules replace Profitability and Sustainability, which capped losses at £39m over three years. Owners may top the allowance up with equity: £33m over three years, and no more than £15m in any one season.
How do the Championship’s rules differ from the Premier League’s?
Both use 85%, but almost nothing else matches. The Championship includes transfer fees and manager costs in the numerator and lets owners inject capped equity; the Premier League counts wages, amortisation and agent fees, has no owner top-up, and instead allows a 30-point multi-year allowance above the line that is levied on use. The Championship monitors in real time; the Premier League assesses on 1 March.
What happens if a Championship club breaches the Squad Cost Rules?
Sanctions escalate rather than landing automatically. A transfer embargo comes first, restricting registrations while the club is over; persistent or severe breaches go to an independent panel that can impose a points deduction. The size is set by the scale and persistence of the breach.
Do parachute payments count towards the 85%?
They count as income, which is the whole problem. A club in the first year of a parachute receives around £55m more than a club without one, so its 85% allowance is tens of millions higher for reasons that have nothing to do with how it is run. Four of the 24 clubs in 2026/27 have a parachute; twenty do not.