The Premier League’s Financial Rules: PSR and Financial Fair Play Explained 

“How much money can my club spend this summer?”

This is an understandable question asked by many Premier League fans ahead of the summer transfer window, which reopened on the 16th of June, following a brief opening ahead of the FIFA Club World Cup.

In short, the answer depends on how much money the club loses.

This is outlined by the Premier League’s Profit and Sustainability Regulations (PSR), not to be confused with UEFA’s Financial Fair Play rules, which were brought in over a decade ago. 

These rules were introduced with the intention of ensuring clubs spend within their means, and this system is set to remain in place for the 2025/26 season, despite Premier League teams voting to overhaul the system, which is now set for the 2026/27 season.

So, if the current PSR system is here to stay, how does it work?

What is PSR and how does it work?

The basic principle of PSR is that clubs are allowed to lose a certain amount of money over a three-year rolling window before they get penalised.

Penalties can include point deductions and fines, and the amount of money they can lose over the three years is £105 million, or £39 million if the club has spent any of the previous three seasons outside of the Premier League.

This means that the club can average a loss of £35 million a season (or £13 million if recently promoted). However, as long as they balance it over three years, they can exceed £35m in a single season. 

For instance, if they were to lose only £10 million in one season and £10 million the season after, the third season would give them the leeway to lose £85 million if they wanted to splash some cash. More on the implications of this later.

It is also worth noting what expenses count toward the ‘loss’ value. These include transfer fees, players’ wages, and manager pay-outs, whereas losses that are seen as in the ‘general interests of football’ do not count, such as investments in infrastructure, women’s teams, and academy costs.

As for revenue, TV money, matchday revenue and sponsorship deals all count, alongside profits on player sales. However, profit in this sense does not necessarily mean the club made money on the player. 

Instead, PSR rules mean that clubs record profits by taking the fee they sold the player for and subtracting the player’s book value. In a nutshell, book value is the portion of the transfer fee they haven’t yet accounted for on their books. 

That book value is gradually reduced each year through a process called amortisation.

What is amortisation?

You may hear the term ‘amortisation’ used quite frequently, and this, put simply, is the way clubs must spread a player’s transfer fee over the course of their entire contract.

Let’s say your club signs a player for £100m. They must amortise this deal, which means that, on the books, the deal will not be recorded as a £100m expense straight away. 

Instead, the books will show that the club lost £20m every year for five years. For instance, if the £100m player is in the second year of their contract, their book value will be £80m for accounting purposes.

This book value is, again, what is taken away from the transfer fee when understanding whether a club, in PSR lingo, has made a profit on a player.

Imagine the club buys the £100m player on a five-year contract. After three years their book value is £40m. 

If they then sell the player for £50m, the PSR calculations would be the £50m sale minus the £40m book value, meaning they made £10m profit under PSR, despite losing £50m in cash overall.

Until late 2023, clubs were allowed to amortise a player’s deal over more than five years, which benefits the club because they could then spend more money without hitting the PSR allowable loss limit.

This saw clubs sign players on long-term deals of more than five years, and amortise the deal over the whole contract, meaning they recorded less loss due to the length of the contract.

However, Premier League clubs voted to change this loophole, implementing a five-year limit on amortisation, regardless of the length of players’ contracts.

Associated Party Transactions

The Premier League has also identified certain practices that may be used to manage reported finances, such as Associated Party Transactions (APTs). 

This is simply the name for deals done between clubs or entities under the same ownership group – for example, player transfers or sponsorship agreements – which could, in some cases, be arranged at values above typical market rates to help boost reported revenue or reduce apparent losses.

To address this, the Premier League introduced rules in 2021, and tightened them in 2024, aimed at “ensuring the veracity of the costs and revenues reported by Clubs” – essentially outlining that deals done should reflect ‘Fair Market Value’

Does PSR favour big clubs?

This is a common concern voiced by fans over PSR, and is worth explaining. 

PSR rules being over a three-year window means that clubs can incur losses of over the £35m limit, as we explained earlier, if they have smaller losses or profits in the season before or after.

This means wealthier clubs can risk spending more money in the short-term, as they know they have the money to offset losses in the future to avoid going over their £105m loss limit. 

Less wealthy clubs, on the other hand, often don’t have the money needed to do so, and therefore can’t spend big on short-term deals, as they wouldn’t be able to offset the losses.

What happens next season?

From the 2026/27 season, a new system is aimed to be put in place revolving around Squad Cost Ratio (SCR). 

This focuses on revenue, rather than loss, and limits clubs to spending 85 percent of their revenue on football costs. 

This means clubs will not be able to overspend and take higher risks, as even if a club has wealthy owners willing to inject cash, the money invested doesn’t count as increased revenue, so it doesn’t expand their spending limit. 

The Premier League’s PSR rules aim to help clubs spend within their means, with a focus on the amount a club loses, though next season’s change to SCR will mean clubs can no longer take the same risks in the transfer market as before.

If you’re interested in how football operates beyond the pitch, Global Institute of Sport offers courses that cover football governance, finance, and regulation, providing practical insights for anyone looking to work in sports management or related fields. To find out more, visit our courses page. 

 Article by Zakaria Anani