The F1 cost cap explained: how much teams can spend, what is excluded and what happens if they breach it

For most of its history Formula 1 was a spending war: the richest teams won because they could outspend everyone else on development, and the field spread accordingly. The cost cap, introduced in 2021, was the sport’s attempt to end that — a hard limit on what any team can spend in a year. Five seasons on, it has changed how teams operate, produced one famous breach, and been substantially rewritten for the 2026 regulations. Here is how it works.

The number

The cap began at $145 million in 2021, fell to $140 million in 2022 and $135 million in 2023, where it remained as a base figure through 2025, with adjustments of around $1.2 million for each race beyond 21 on the calendar and allowances for inflation. For 2026 the limit was raised substantially — to around $215 million — but the increase is not like-for-like: several categories of spending that were previously excluded were brought inside the cap at the same time, so the real change in permitted spending is smaller than the headline number suggests.

What counts

Broadly, the cap covers everything involved in designing, building and racing the cars: engineering staff, manufacturing, research and development, wind-tunnel and simulation costs, spare parts, crash damage, logistics for freight and garage equipment. When a driver crashes heavily, the cost of the replacement parts comes out of the same budget as the next aerodynamic upgrade, which is why accidents now have a strategic price beyond the lost race.

What is excluded

• Driver salaries — the largest single exclusion, which is why elite drivers can still command enormous fees.
• The three highest-paid staff — typically the team principal and senior technical leaders.
• Marketing and hospitality, so commercial activities do not compete with car development.
• Travel and accommodation for staff.
• Heritage and non-F1 activities, such as running historic cars or other racing programmes.
• Employee bonuses, maternity and paternity costs, and most taxes.
• Power unit costs, which are governed by a separate cap on engine manufacturers introduced in 2023.

The exclusions are where disputes happen. Teams with large non-F1 businesses — road-car divisions, technology arms, sister racing teams — face constant scrutiny over whether shared staff and facilities are correctly allocated.

How it is policed

Each team submits detailed financial reports to the FIA’s Cost Cap Administration, which audits them and issues a certificate of compliance the following year. The process is slow and confidential, which is why breaches surface months after the season in question. Teams also face restrictions on capital expenditure — factory upgrades, new simulators — which are capped separately over multi-year periods.

The Red Bull breach

In 2022 the FIA found that Red Bull had exceeded the 2021 cap by a “minor” margin, largely through disputed accounting of catering, sick pay and tax. The penalty — a $7 million fine and a 10 per cent reduction in aerodynamic testing time for 12 months — was criticised by rivals as too lenient for a team that had just won the championship, and praised by others as proportionate to an overspend under 5 per cent. It remains the only significant breach to date and set the template for how the rules are enforced.

Penalties

A minor breach — an overspend of less than 5 per cent — can bring fines, deductions of constructors’ points, reductions in testing allowances and public reprimands. A material breach of more than 5 per cent opens the way to heavy points deductions from both championships, suspension from races or, in principle, exclusion from the championship. Procedural breaches, such as late or inaccurate submissions, carry their own fines.

Has it worked?

The cap has clearly changed team behaviour: smaller teams have become profitable, valuations have soared, and the biggest teams have had to make genuine choices about where to spend. It has not, on its own, produced the tightly bunched field its architects hoped for — 2026’s order is as stratified as ever, driven by the new power units rather than chassis spending. The counter-argument is that the cap’s effect is cumulative: as the years of constrained spending add up, the structural advantages of the historic super-teams should erode. Whether that happens is one of the sport’s defining questions for the rest of the decade.

Frequently asked questions

What is the F1 cost cap?

An annual limit on team spending on designing, building and racing cars, introduced in 2021 at $145 million and adjusted since, with a substantial revision for 2026.

What is excluded?

Driver salaries, the three highest-paid staff, marketing, travel, heritage activities, bonuses, most tax and power unit costs.

Has any team broken it?

Red Bull committed a minor breach of the 2021 cap, receiving a $7 million fine and a 10 per cent aerodynamic testing cut.

What is the penalty for a breach?

Minor breaches bring fines, points deductions and testing restrictions; material breaches over 5 per cent can bring heavy points deductions, suspension or exclusion.