English Football League clubs are operating under a major shift in financial regulation during the 2026/27 season. Championship sides have moved away from the old Profitability and Sustainability rules, known as P&S, to a new Squad Cost Rules system, or SCR. In League One, clubs are working under a stricter version of the existing Salary Cost Management Protocol, or SCMP.
The EFL brought in these changes to curb heavy losses and make clubs less dependent on wealthy owners to pay the bills. At the same time, the updated rules have raised serious questions about how tighter spending limits will affect player recruitment, contracts and competition on the pitch.
In League One, those concerns have led the Professional Footballers’ Association, or PFA, to launch High Court legal proceedings against the EFL over how the changes were approved.
As of 11 November 2026, no public judgment or settlement has been reached in the case. The EFL’s revised rules remain in full operation across both divisions while the legal dispute continues.
How the new Championship cost rules work
In the Championship, Squad Cost Rules have replaced the old P&S system. The main rule is that a club’s squad spending must not go above 85% of its allowable income, though the calculation is more detailed than a simple cap on wages against regular club turnover.
Allowable income combines three elements. These are 85% of relevant football turnover, 85% of net profit or loss from player trading, and permitted owner equity injections. Relevant football turnover covers everyday football revenue such as matchday ticket sales, broadcasting money, sponsorship deals and merchandise, while certain income streams are excluded or adjusted under the regulations. Squad costs cover wages and related payments for both players and the first-team manager.
Owner funding is still permitted within strict limits. Current EFL financial regulation guidance sets an owner equity allowance of up to £34 million over a three-year period, with a maximum of £16 million allowed in a single season. Qualifying equity injections, which are permanent investments rather than debt, count in full towards allowable income, subject to detailed rules and transitional provisions. This cap is not an automatic right for every club to spend that sum, and loans that have to be paid back do not automatically count as equity.
Transfer business is also measured differently under SCR. Instead of relying on accounting profit and amortisation, which spreads a player’s transfer fee across the length of a contract on paper, the new system assesses net player trading on a cash basis. If a Championship club sells a player for £10 million and is scheduled to receive £7 million in one season and £3 million in the next, each instalment counts in the specific season when the cash is due to arrive. That makes the timing of transfer payments an important part of squad planning.
The EFL designed SCR to give regulators an earlier view of clubs’ finances during the season. Because 2026/27 includes a transitional period, routine real-time SCR registration checks will not begin until the January 2027 transfer window. Championship clubs have still had to submit their financial figures and are expected to stay within the new limits throughout the campaign.
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Tighter spending limits in League One
League One clubs have kept the SCMP structure, but the EFL has tightened the rules for the 2026/27 season. The share of turnover that a standard League One club can spend on player wages has been cut from 60% to 50%. First-team manager costs are now counted inside that calculation alongside player wages, related payments and agents’ fees.
Clubs dropping into League One after relegation from the Championship receive a transitional limit of 65% of turnover for their first season back in the third tier. That is down from the previous 75% allowance.
The rules governing owner funding have changed as well. Rather than using the old staggered system, qualifying owner cash injections now boost a club’s permitted squad spending at the same rate as its main cap, which is 50% for most sides or 65% for a newly relegated club.
In practical terms, if an ordinary League One club receives a qualifying £500,000 injection from its owner, only up to £250,000 can be added to its permitted first-team wage budget. The other £250,000 can still pay for general club running costs, but it does not create extra spending room for the playing squad.
While the EFL wants these limits to cut losses and stop wage bills from relying too heavily on wealthy benefactors, the impact will vary across the division. A club with strong commercial income or regular cash from selling players will naturally have more room to build its squad than a rival operating on a much smaller revenue base.
The PFA legal challenge and the 2021 salary cap dispute
The League One changes prompted the PFA to start High Court legal proceedings in August 2026. The players’ union argues that the EFL could not bring in the tighter SCMP limits without securing formal agreement through the Professional Football Negotiating and Consultative Committee, or PFNCC. From the union’s perspective, cutting the spending percentage directly restricts players’ earning power and employment conditions across the division.
The EFL rejects that interpretation. In its 11 August 2026 statement on the PFA legal proceedings, the League said the proposals were discussed through the PFNCC process, including with the PFA. The EFL argues that the amendments simply update an existing financial control system and do not amount to the kind of major change to players’ employment terms that requires full union agreement.
EFL Chief Executive Trevor Birch stated that the changes are “not about undermining players’ interests” and are instead meant to create “a stable environment in which Clubs can meet their obligations and continue to invest in football”.
This legal dispute carries extra weight because of what happened in 2021. Five years ago, an independent arbitration panel found that the EFL had broken the PFNCC constitution when it introduced hard salary caps in League One and League Two without the required agreement, forcing the League to withdraw the caps.
That 2021 decision gives the PFA a relevant precedent, though it does not automatically decide the current case. The EFL maintains that adjusting percentages within the long-running SCMP rules is legally different from imposing flat salary caps. The central question for the court is whether the 2026 amendments fall under the same consultation and approval rules.
Filing a claim is not a court ruling that the new rules are unlawful, and no public decision has suspended the revised SCMP. Clubs must continue to follow the tighter limits while the dispute remains unresolved.
Oxford United and how enforcement works in practice
Oxford United’s situation shows how SCMP enforcement affects recruitment on the ground. Having entered League One after relegation from the Championship, Oxford were placed under a restriction in July 2026 after confirming they were not compliant with SCMP regulations. The club has remained listed on the EFL registration embargo register under SCMP Rule 9.1 for Failure to Comply, which stops them from registering new senior players freely while the restriction is in place.
An SCMP embargo does not prove that a club is insolvent or unable to pay its players, and it does not automatically prove that a club has blown past its 50% or 65% spending threshold. The EFL can place a club under an embargo when it misses deadlines for required financial paperwork or cannot demonstrate that its numbers comply with the rules.
Under EFL regulations, a club operating under an embargo can still register academy players and scholars, or sign players without transfer or loan fees under strict conditions if its squad drops below 23 players of professional standing.
Because the public embargo register only names the regulation breached and does not publish a club’s private financial calculation, outsiders cannot verify the exact figures behind Oxford’s sanction. Independent public guides that estimate club wage-to-turnover ratios rely on public accounts and estimates rather than official EFL compliance findings.
For that reason, Oxford’s embargo is a clear example of how the system restricts transfer business, but it is not proof that cutting the standard League One limit from 60% to 50% caused the sanction on its own.
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What the changes mean for competition and the January window
The debate around both sets of rules comes down to a balance between financial protection and sporting ambition. Lower spending limits are designed to reduce financial risk and stop clubs from committing to long-term contracts they cannot afford.
On the other hand, tighter caps could make it harder for smaller clubs or newly promoted sides to compete for experienced players, keep their best performers, or rebuild a struggling squad during a difficult season, potentially making clubs more reliant on academy prospects and player sales.
The next round of financial submissions and the January 2027 transfer window should provide a much clearer picture of how clubs are coping. Championship sides will enter routine real-time SCR registration testing for the first time in January, while League One clubs must continue reporting their numbers under the tighter SCMP limits.
The outcome of the PFA’s High Court case will be just as important for the future of EFL governance. A ruling in the union’s favour would raise serious questions about the process used to bring in the League One changes, while an EFL victory would confirm the League’s power to tighten existing cost rules without full PFNCC agreement.
Four months into the 2026/27 campaign, it is still too early to call the new rules a success or a failure. The opening part of the season has shown how the regulations work on paper, but their true impact on wages, squad depth and competitive balance will only become clear once January trading begins and the legal challenge is settled. The test for the EFL is whether these rules can improve financial stability without making it harder for clubs outside the wealthiest part of the game to compete.
