Premier League clubs voted on Friday to overhaul the competition's financial rules, bringing in a new system that focuses solely on spending that directly affects what happens on the pitch.
Clubs opted by a majority of 14 to six to introduce the squad cost ratio (SCR) model, which will limit clubs' "on-pitch spending" to 85 per cent of their football-related revenue and net profit or loss on player sales.
Squad-related costs include player wages, agents' fees and transfer fees.
European football's governing body UEFA operates a similar model, which limits spending on player and coach wages, transfers and agent fees to 70 per cent of club revenue.
The Premier League said in a statement that clubs would have a "multi-year allowance" of 30 per cent which they can use to spend above the 85 per cent limit, and that using the allowance would incur a levy – effectively a luxury tax.
Once the allowance is used up, teams will face sporting sanctions such as points deductions if they go above 85 per cent.
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The Premier League said the system, which will come into effect from the 2026/27 season, would be simpler because of its focus on "football costs".
Under the new rules, clubs will not be able to sell assets such as hotels and women's teams to related companies in order to spend more on squad-related costs.
Chelsea sold two hotels to a sister company in 2023 and sold their women's team to parent company BlueCo, helping boost the club's balance sheet under existing existing profitability and sustainability (PSR) rules.
Clubs also voted Friday to bring in sustainability and systemic resilience (SSR) rules, which will assess a club's short, medium and long-term financial health through a variety of tests.
The clubs, however, voted against a new financial mechanism that would have put a hard spending cap on player-related costs.
Top-to-bottom 'anchoring' would have limited any club's spending on squad costs to five times the amount received in central income by the league's bottom club.
The Professional Footballers' Association, said the measure would have effectively been a salary cap and threatened strike action.
Under PSR, clubs are entitled to lose a maximum of £105 million over a rolling three-season period.
Both Nottingham Forest and Everton were given points deductions in the 2023/24 season for breaching PSR rules.