Championship clubs will be allowed to spend up to 85% of their football income on squad costs from next season under new financial rules.
Championship clubs have formally endorsed a fresh financial structure called Squad Cost Rules (SCR) that will take effect from the upcoming season.
This new system brings the second tier more closely in line with the Premier League, which had already implemented its version of SCR back in November.
Under the previous framework, clubs were restricted by profit and sustainability regulations that capped losses at £39 million over a three-year span.
The updated rules shift the focus to a club's total football-related earnings and the proportion spent on player and manager expenditures rather than relying on profit and loss calculations.
A minimum of sixteen out of the twenty-four Championship clubs had to vote in favor of the rule change for it to pass.
Financial reports from the 2024-25 season revealed that only three clubs managed to finish in profit, with Stoke City among them due to a £90 million loan waived by owner John Coates, which erased what would have been a £29 million deficit.
Excluding Stoke's adjusted figures, the remaining twenty-two clubs reported combined losses of £317 million for the same period.
The new SCR framework will cap expenditures on player transfers, salaries, and manager-related costs at 85% of each club's football income.
Owners will be granted a flexible equity injection allowance totaling £33 million spread over three seasons, with no more than £15 million permitted in any single campaign.
Additional safeguards have been introduced to scrutinize commercial agreements tied to owners or their associates.
An official statement from the English Football League explained that the updated system enables ongoing financial oversight throughout the season, replacing the previous post-season reviews to provide clubs with earlier clarity on their financial standings.
Clubs with larger stadiums and high-value sponsorship deals will particularly benefit from the new rules, as the framework effectively expands their available budgets for player acquisitions.
Changes have also been introduced to the Salary Cost Management Protocol (SCMP) in League One, where the wage spending cap will drop from 60% to 50% of turnover.
Relegated clubs transitioning from the Championship to League One will receive a temporary increase, permitted to allocate 65% of turnover to wages in their first season, down from the previous 75%.
A proposal for League Two to adopt the same SCMP calculation did not secure enough support.
The English Football League emphasized that the revised framework introduces real-time financial monitoring during the season, replacing the former practice of reviewing figures after the fact.
The goal is to provide clubs with greater transparency and earlier insights into their financial positions.
The statement highlighted that this shift aims to foster financial stability and informed decision-making across the Championship and lower divisions.
1. Squad Cost Rules (SCR) replace Profit and Sustainability in the Championship starting next season.
2. Clubs can spend up to 85% of football income on squad-related expenses.
3. Owners may inject up to £33 million in equity over three years, with a maximum of £15 million per season.
4. Commercial deals linked to owners or associates are subject to additional scrutiny.
5. League One clubs face a wage spending cap reduction from 60% to 50% of turnover.
6. Relegated clubs may spend 65% of turnover on wages in their first League One season, down from 75%