The Championship returns on Friday evening, less than three months since its season-end was plagued by scandal.‘Spygate’ erupted in May, which resulted in Southampton being unceremoniously dumped from the play-off final they had qualified for; barred from competing for a promotion which would have conferred a £200million-plus bounty. Hull City were the surprise beneficiaries, as they beat a reinstated Middlesbrough in the final.Hull’s return to the Premier League for 2026-27 sees them come under the auspices of new financial strictures, with England’s top tier having ditched profitability and sustainability rules (PSR) in favour of a squad cost ratio (SCR), which tethers spending on football-related staff to club revenues.Changes are afoot in the league Hull left behind, too.Following a vote in May, the Championship has introduced its own version of SCR for 2026-27 which, on the surface, looks similar to the Premier League version.Yet there are some key differences, and the result of other votes three months ago means the Championship and the EFL’s other two divisions, League One and League Two, will continue to operate three different sets of financial rules, where some have changed from last season while others remain in place. Let The Athletic explain all.What are the new rules?For each of the past 10 seasons, clubs in the second-tier Championship have operated under profitability and sustainability rules (PSR) — regulations which, similar to the PSR operated in the Premier League, sought to restrict overall club losses across a rolling three-year period. Championship loss limits were markedly lower than those applied to Premier League clubs.Just like those Premier League sides, Championship teams voted to dispense with PSR and shift to squad cost rules (SCR), which target expenditure on players, managers and agents, limiting how much clubs can spend relative to their ‘allowable income’. The Championship operated an SCR regime in shadow last season; from 2026-27 onwards, SCR will be the primary financial regulation in place in England’s second division.Unlike PSR, SCR is measured on a single-season basis and is intended to be monitored ‘real-time, during the season’. A complaint about PSR was that its judgements usually landed long after a breach had taken place. SCR’s closer monitoring and single-season assessment aim for much faster resolutions.That’s all very similar to the Premier League’s SCR shift but the EFL version contains some key differences.For one, that ‘allowable income’ denominator includes not just a club’s standard turnover but also its ‘allowable P&M (players and manager) trading amount’ and its ‘allowable equity injection’.The former is akin to the player profits the Premier League and UEFA allow clubs to include in their SCR calculations, but the EFL’s version comes replete with crucial differences. Under Premier League and UEFA SCR, clubs take the accounting profit (or loss) made on player sales and average it over three seasons. Under the EFL’s Championship version, the ‘allowable P&M trading amount’ is measured across just one season, from May 1 to April 30, and, quite distinctly, is done on a net cash-flow basis.In other words, accounting profits are ignored and so too, on the cost side of the equation, are amortisation costs (whereby clubs expense transfer fees over the lifespan of a player’s contract).The Championship teams have voted through an SCR regime which focuses on liquidity and the actual inflows and outflows of transfer instalments, akin to rules already operating in Leagues One and Two, and a decision one source familiar with discussions on the matter said clubs felt was “more transparent” and enabled easier monitoring. It is an important divergence from Premier League SCR.A further one comes with the inclusion of equity funding from club owners. That is limited, but its presence at all is a stark difference, as it means club spending can in effect be topped up by benevolent ownership — of which the Championship is in no short supply; over £3.2billion has been provided to the division in the past decade.Clubs are restricted to a maximum equity allowance over three consecutive seasons, with a further annual cap baked into that so owners can’t just pump in the full amount in one go. The calculation is convoluted and linked to the size of parachute payments and solidarity payments, each received by Championship clubs from the Premier League.Based on 2025-26 figures, clubs would have been restricted to around £32million in allowable equity injections for SCR purposes over three seasons, with a maximum of £15.2m able to be included in the calculation in a single season. Those are still hardly small figures, and the inclusion of equity at all brings into question just how much the new rules will lead to an improvement in club finances. As one EFL club owner put it to The Athletic: “In any other industry, if you count equity injections as revenue, you’d be jailed for fraud.”That is a wry exaggeration — there is, we should be clear, nothing fraudulent about the rules that have been enacted — but it does point to the limitations of the Championship’s form of SCR when it comes to promoting club sustainability.So, too, does where the squad cost limit has been set.Middlesbrough have been one of the Championship’s proactive recruiters this summer (Stu Forster/Getty Images)Championship clubs’ spending on players, managers and agents’ fees (which will also be dealt with on a cash-flow basis, unlike the amortisation treatment seen under the Premier League and UEFA versions of SCR) will be limited to 85 per cent of relevant turnover, plus 85 per cent of that ‘allowable P&M trading amount’, plus 100 per cent of a club’s allowable equity injection in a given season. Clubs can reduce the ‘squad cost’ element of their calculation with whatever they spend on ‘non-established’ under-21 players.One rung below the Championship, League One clubs voted for a tightening of the Salary Cost Management Protocol (SCMP) rules which have been in operation for several years.Previously, third-tier sides could spend 60 per cent of relevant turnover, alongside varying proportions of equity injected by owners, with the latter included in SCMP calculations in a staggered manner. That was quite confusing, so the clubs voted to get rid of it.They also decided to reduce the relevant percentage to 50 per cent (or 65 per cent for recently relegated teams, such as Leicester City). League One club spending on players, managers and agents will now be limited to 50 per cent of relevant turnover, plus 50 per cent of any equity injections, plus 100 per cent of player trading income which, like in the Championship now, has and continues to be measured on a net cash basis.Importantly, while only half of equity funding now counts towards a club’s SCMP figures, there is no limit on how much owners can put in. The idea is to encourage investment in infrastructure, but a particularly benevolent owner could pour in vast sums which could then be utilised on the squad.Elsewhere, a proposal for League Two to mirror the League One approach to equity injections was voted down. The staggered approach will remain in the fourth tier, as will the SCMP percentage of 50 per cent already in place.How will the changes impact clubs?The real-time nature of both SCR and SCMP, which was already in place in the bottom two EFL divisions, enables greater transparency and swift repercussions should clubs run into trouble with their division’s rules.Yet how much the shift will improve the financial lot of clubs is up for debate.As most clubs don’t publish player wage bills, precise estimates of their squad costs are difficult to make. Using some reasonable assumptions, The Athletic found that as many as 10 Championship clubs would have breached the new squad cost rule had it been in place in 2024-25, albeit that was only the case if they were not in receipt of equity funding. With equity funding, nobody would have ran afoul of the new rule.That calls into question how much a division which has lost over £3billion in the past 10 years will move toward something resembling good financial health under the new rules. An 85 per cent limit still leaves little left over to fund non-staff operating costs, which averaged 48 per cent of revenues in the Championship in 2024-25.It is telling, too, that the EFL’s own announcement of the new regime in its highest division did not actually allude to SCR improving sustainability at all. Instead, the shift is “intended to create a simpler and more responsive system of cost control within the Championship.”For some clubs who were running close to the wire under PSR, the shift will ease regulatory worries, as operating costs are now excluded. That means losses can still be racked up but, provided a club is careful about its football-related costs, no rules will be broken.That seems rather unfair on those who operated well under their PSR limit, and a concession offered by the EFL arrives in the form of a transitional ‘allowable headroom injection’. Where a club’s PSR loss was less than £10million over the past two seasons, owners will be allowed to inject a further £13m over the next three seasons, on top of the aforementioned equity allowance. That is a nice sweetener but, again, hardly has the division’s sights set on sustainability.What do clubs think of the new rules?In the Championship, SCR passed by a majority of 20 votes to four, suggesting pretty strong support for the new rules.Yet the EFL is comprised of 72 teams, broadening the scope for differing viewpoints and, through discussions with multiple club executives across all three divisions in recent weeks, The Athletic has heard a wide array of views on the EFL’s financial regulations.One club who voted in favour of the shift to SCR, even as they operated comfortably under PSR and, indeed, will see their headroom reduced under the new system, are Portsmouth.“We were very supportive,” club CEO Andrew Cullen tells The Athletic. Portsmouth will benefit from that ‘allowable headroom injection’ because of their low PSR losses, and that concession, says Cullen, “gave us the encouragement to go forward with what we thought was in the best interests of the game. The overall principle is encouraging clubs to operate sustainably within their means.”Portsmouth are supportive of the rule changes (Jasper Wax/Getty Images)But does an 85 per cent limit really hint at sustainability?“We’ll find out as we go,” says Cullen, who acknowledges the changes as a step rather than the solution. “There may be scope, as League One and League Two have done, to reduce the percentages. I don’t think the answer is for us to oppose the principle of the rules, because we’re all here to encourage clubs to spend in proportion to what they earn and can afford.”Moving away from a retrospective punishment mechanism appealed to Portsmouth too, as did the shift to a focus on liquidity, something which meshes with the aims of the Independent Football Regulator which recently came into operation in England.One owner of an EFL club, who spoke to The Athletic on the condition of anonymity to protect relationships, was more pessimistic. “I think the direction the Championship is trending towards is spending more.”They highlighted a schism within the three divisions, where the Championship still wants to push the envelope but the two divisions beneath are keen to rein in swingeing deficits.“League One and League Two are fairly closely aligned. The League Two vote failed because people thought it just didn’t make any difference really. For League One it made more of a difference because they’ve basically just come into line with League Two.”Getting losses down is of paramount importance to those clubs further down the pyramid, where Premier League riches are so far out of reach as to be a pipe dream. In 2024-25, average League One losses topped £7million; in League Two, they now near £3m per club. Losses are not so much trickling downstream as gushing.That same EFL owner has little faith the changes to League One rules will have a positive impact. “I think player wages will go up next year compared to last year, simply because of the ability to put in unlimited amounts of equity.”Brad Galinson, chairman and majority owner of Gillingham, is lukewarm on the impact the rule changes will have in improving finances. “Neutral at best: they’re not necessarily a bad thing, but certainly don’t effectively solve anything.”Gillingham are currently in League Two and, like others, their chairman thinks a slightly tightened SCMP regime in League One will have little impact, and that much greater action is needed. “There’s not a version of sustainability that SCMP represents,” he says. “It has unlimited equity participation. So it’s not really sustainability.”Galinson is, however, optimistic that there is an appetite for positive change, at least in the third and fourth tiers.He says: “It’s much more reasonable for a League One or League Two club to try to be sustainable. It’s much easier to pass, versus when you start playing for the big, big money. Hopefully [better rule changes] can bubble up over time.”Brad Galinson, chairman and majority owner of Gillingham is sceptical about the impact of the changes (Alex Pantling/Getty Images)What is clear is no one thinks the changes enacted in either the Championship or League One are a resolution to the EFL’s marked financial ills.“They’re a first step along the way,” Ian Mather, a director at Cambridge United, tells The Athletic. “What we’ve seen in recent years is rapid inflation in player pay. Anything which helps restrict that rapid inflation has got to be a good thing.”One of the topics raised by Cullen is that Championship clubs need to find ways to boost income alongside restraining costs. It is an issue which spans the EFL, one Mather highlighted too. “I don’t think there’s enough income coming into clubs beyond owner income.”That is a point about clubs maximising revenue streams they can control, but how much will trickle down from the Premier League in the future is a key consideration for all 72 EFL clubs right now. While clear that they aren’t the finished product, Mather points to the changing rules in the Championship as a key step toward finding agreement on future TV money distributions.“I think the willingness is there to tighten things up, and I think that’s essential we [show that], for reasons of sustainability but also in terms of doing a deal with the Premier League. “It’s a necessary prerequisite of getting better funding from the Premier League — to make sure we don’t blow it all on player pay — whether it’s the Championship or League One or League Two.”What happens next?Already, there are issues.Earlier this week, the EFL confirmed it had been issued with legal proceedings by the Professional Footballers’ Association (PFA) because of the changes enacted in League One, with the PFA citing insufficient consultation on the rule amendments. The development was met with private fury from several higher-ups at EFL clubs, with those growing club losses cited.What happens there remains to be seen but, even if the EFL sees off that legal threat, this is far from the end of the organisation’s work on financial regulations — especially in the bottom two divisions.The Athletic has spoken with multiple people across League One and League Two who currently sit on working groups that are aiming to find a solution to endemic loss-making throughout the English pyramid.The consensus among those we’ve spoken to for this piece is that the amendments to League One rules for 2026-27 were only voted through on the proviso more work would be done, with the aim of a more robust framework being implemented for the 2027-28 season. In League Two, tweaks to SCMP were thrown out in large part because they were seen as worthless. England’s top four divisions now have four different sets of financial rules in place.And all of this sits within the broader context of how English football manages its finances and shares its money. Progress on a new distribution deal has been glacial but Premier League clubs have, at least, recently put a proper offer to EFL, though one which seems unlikely to be accepted.Even within the EFL, agreement is hard to come by. During discussions with several people for this piece, a recurrent theme raised was the how the EFL then distributes the money it receives from the Premier League. Currently, that is spread across the three divisions on an 80/12/8 split; many in League One and League Two, including Mather, believe their share needs upping.Those are the battles to come.For now, Wolves and Blackburn Rovers will kick off a Championship season sure, like many before it, to be full of intrigue and excitement. But don’t bank on the league’s clubs fixing their finances any time soon.