In November 2023, Everton Football Club was docked 10 points (later reduced to six on appeal) for breaching the Premier League's financial rules. It was the first time in Premier League history that a club had been hit with a points deduction for overspending, and it sent shockwaves through English football. A few months later, Nottingham Forest received a four-point deduction for the same offence. And looming over the entire league is the case of Manchester City, which faces 115 charges for alleged financial breaches dating back to 2009, with a hearing scheduled for 2024–25. So what are these rules, why do clubs keep breaking them, and how do they work? Here is everything you need to know about Premier League financial fair play.

What PSR Is

The Premier League's financial rules are officially called Profitability and Sustainability Rules (PSR). They were introduced in 2013 (and updated several times since) to prevent clubs from spending beyond their means and risking financial collapse.

The core rule is simple: a club cannot lose more than £105 million over a rolling three-year period. Losses are calculated using the club's audited accounts, and the limit applies to the club's football operations, not the wider business.

If a club breaches the £105 million limit, it is referred to an independent commission, which can impose sanctions including:

  • Points deductions
  • Fines
  • Transfer bans
  • Restrictions on squad size or wages

The £105 million limit is not arbitrary. It is based on the idea that a club's owner can inject up to £35 million per year in equity (not loans) to cover losses. Over three years, that is £105 million. Clubs promoted from the Championship have a lower limit (£61 million over three years) to reflect their smaller revenues.

What Counts as a Loss

Not all spending counts towards the £105 million limit. The Premier League excludes certain costs to encourage investment in areas it considers beneficial:

  • Youth development (academy costs)
  • Women's football (the women's team)
  • Community projects
  • Stadium infrastructure (building or renovating stadiums)

So a club that spends £50 million on a new training ground or £20 million on its academy does not count that towards the £105 million limit. This is designed to encourage long-term investment rather than short-term spending on player wages.

Transfer fees are amortised over the length of the player's contract. If a club buys a player for £50 million on a five-year contract, the cost is spread over five years (£10 million per year) for PSR purposes. This is standard accounting practice, but it creates opportunities for creative accounting (more on that below).

Why PSR Exists

The Premier League introduced PSR in 2013, following UEFA's introduction of Financial Fair Play (FFP) rules in 2011. The motivation was to prevent clubs from:

  1. Spending themselves into bankruptcy — Several English clubs (Portsmouth, Leeds United, Bolton Wanderers) had gone into administration in the 2000s after overspending on wages and transfers.
  2. Creating an uneven playing field — Wealthy owners (like Roman Abramovich at Chelsea or Sheikh Mansour at Manchester City) could inject unlimited funds, making it impossible for other clubs to compete.
  3. Destabilising the league — If clubs went bust mid-season, it would disrupt the competition and damage the league's reputation.

The rules were controversial from the start. Critics argued they would entrench the dominance of the biggest clubs (who already had high revenues) and prevent ambitious owners from investing in smaller clubs. Supporters said they would ensure financial sustainability and protect clubs from reckless owners.

Recent Breaches: Everton and Nottingham Forest

Everton (2023)

Everton reported losses of £371.8 million over the three years ending in 2021–22, far exceeding the £105 million limit. The club argued that the losses were due to the COVID-19 pandemic (which hit matchday revenues), the suspension of a major sponsor (the Russian oligarch Alisher Usmanov, whose companies were sanctioned after Russia's invasion of Ukraine), and the cost of building a new stadium.

The Premier League referred Everton to an independent commission, which found the club guilty of breaching PSR. The commission initially imposed a 10-point deduction, the largest sporting sanction in Premier League history. Everton appealed, and the penalty was reduced to six points. The club avoided relegation but finished 15th, well below expectations.

Everton's punishment was controversial. Some argued it was too harsh, given the mitigating circumstances (COVID, the loss of a sponsor). Others said it was too lenient, and that Everton had knowingly overspent for years.

Nottingham Forest (2024)

Nottingham Forest, promoted to the Premier League in 2022, breached PSR by £34.5 million over the three years ending in 2022–23. The club had spent heavily on new players to avoid relegation, but the spending pushed them over the limit.

Forest was docked four points in March 2024. The club argued that it had tried to sell a player (Brennan Johnson) before the accounting deadline but that the deal had fallen through. The commission accepted this as mitigation and reduced the penalty from what might have been a larger deduction.

Forest survived relegation by one point, finishing 17th. Without the deduction, they would have finished comfortably mid-table.

The Manchester City Case

The most serious PSR case involves Manchester City, the Premier League's dominant force over the past decade. In February 2023, the Premier League charged City with 115 breaches of financial rules, covering the period from 2009 to 2018.

The charges include:

  • Failing to provide accurate financial information
  • Failing to cooperate with Premier League investigations
  • Breaching PSR (by allegedly inflating sponsorship revenues from related parties, such as Etihad Airways, which is owned by the Abu Dhabi government, the same entity that owns City)

City denies all charges and has described the case as a "witch hunt." The club argues that its sponsorship deals are legitimate and reflect its global brand value. The Premier League argues that City inflated revenues to circumvent PSR and gain an unfair competitive advantage.

The case is being heard by an independent commission, with a hearing scheduled for late 2024 or early 2025. If City is found guilty, the sanctions could be severe, potentially including:

  • Points deductions (possibly large enough to relegate City)
  • Stripping of titles (City won the Premier League in 2012, 2014, 2018, 2019, 2021, 2022, and 2023)
  • Fines
  • Transfer bans
  • Expulsion from the Premier League (the nuclear option, considered unlikely)

The case is the most serious in Premier League history and could reshape English football. If City is found guilty, it would vindicate the Premier League's enforcement of PSR. If City is cleared, it would raise questions about whether the rules are enforceable at all.

How Clubs Get Around PSR

Despite the rules, clubs have found creative ways to stay within the £105 million limit:

1. Amortisation and long contracts

By signing players to long contracts, clubs can spread the transfer fee over more years, reducing the annual cost for PSR purposes. Chelsea, under new owner Todd Boehly, has signed players to seven- and eight-year contracts (the maximum allowed) to minimise the annual amortisation charge.

For example, if Chelsea buys a player for £80 million on an eight-year contract, the annual cost is £10 million for PSR purposes, even though the club has paid £80 million upfront (or in instalments).

Clubs can sell players to other clubs owned by the same entity or related parties, booking a profit that improves their PSR position. This is known as related-party transactions and is heavily scrutinised by regulators.

In 2023, Chelsea sold two players to sister clubs in the same ownership group (Strasbourg and Salzburg) for a combined £20 million, booking a profit that helped them stay within PSR limits. The Premier League is tightening rules on such transactions.

3. Inflating sponsorship deals

Clubs can book sponsorship or stadium naming rights deals at inflated values, increasing revenues and improving their PSR position. This is what Manchester City is accused of doing with Etihad Airways and other Abu Dhabi-linked sponsors.

The Premier League now requires fair market value assessments of related-party sponsorship deals to prevent this.

4. Selling academy players

Homegrown players (those who came through the club's academy) have no amortised transfer cost, so selling them books a pure profit for PSR purposes. Chelsea has sold several academy graduates (Mason Mount, Ruben Loftus-Cheek, Tammy Abraham) to raise funds and stay within PSR limits.

Criticisms of PSR

PSR has been widely criticised, including by clubs, fans, and economists:

1. It entrenches inequality

The £105 million limit is the same for all clubs, but the biggest clubs (Manchester United, Liverpool, Arsenal) have revenues of £600–700 million per year, while smaller clubs have revenues of £100–150 million. This means the big clubs can spend far more on wages and transfers while staying within PSR, because their revenues are higher.

PSR effectively locks in the existing hierarchy and makes it almost impossible for a smaller club to break into the top six, even if it has an ambitious owner willing to invest.

2. It punishes investment

PSR treats owner investment (equity injections) as a cost, not a benefit. This discourages owners from investing in their clubs and makes it harder for clubs to compete with the established elite.

Critics argue that owner investment should be encouraged, not restricted, as long as it is genuine equity (not debt that could bankrupt the club).

3. It is inconsistently enforced

Everton and Nottingham Forest were punished quickly and harshly, while Manchester City's case has dragged on for years. This has created a perception that the Premier League is willing to punish smaller clubs but reluctant to take on the biggest and most powerful.

4. It stifles competition

By preventing clubs from spending beyond their revenues, PSR reduces the chances of a "Leicester City moment" (Leicester won the Premier League in 2016 against 5,000–1 odds). It makes the league more predictable and less exciting.

The Future: The New Football Regulator

The UK government is introducing an independent football regulator to oversee English football's finances. The regulator, expected to be operational by 2025–26, will have powers to:

  • Enforce financial rules across all leagues (not just the Premier League)
  • Block club takeovers that pose financial risks
  • Impose sanctions on clubs and owners who breach rules

The regulator is intended to provide more consistent and transparent enforcement of financial rules, and to prevent clubs from collapsing due to reckless spending. But it also raises questions about government interference in sport and whether the regulator will be more or less effective than the Premier League's current system.

The Bottom Line

Premier League Profitability and Sustainability Rules limit clubs to £105 million in losses over three years, with certain costs (youth development, women's football, infrastructure) excluded. Clubs that breach PSR face points deductions, fines, or transfer bans, as Everton and Nottingham Forest discovered in 2023–24. Manchester City faces 115 charges for alleged breaches, the most serious case in Premier League history, with a hearing due in 2024–25. Clubs use creative accounting to stay within the limits, including long contracts, related-party sales, and inflated sponsorship deals. Critics argue PSR entrenches the dominance of wealthy clubs, punishes investment, and is inconsistently enforced, while supporters say it prevents financial collapse and ensures sustainability. The UK government is introducing an independent football regulator to provide more consistent oversight. PSR is here to stay, but its future shape — and whether it can be enforced against the biggest clubs — remains uncertain.