F1 Budget Cap EXPLAINED: How much is it? How does it work? (2024)

FAQs

How does the Formula 1 budget cap work? ›

The budget cap — set at $135 million per team in 2023 — limits how much teams can spend on developing and building their race cars. Before it was introduced in 2021, the top teams in the league could spend multiples of that in a given year.

Formula 1's cost cap may have helped close up the grid, believes the FIA, but there has been a downside in it preventing troubled squads making swift recoveries. Since 2021, F1 teams have had to operate under a budget cap limit which was introduced to put grand prix racing on a more stable financial platform.

The FIA has confirmed that there were no breaches of the F1 cost cap last season, meaning there'll be none of the controversy that saw Red Bull fined $7 million (about £6 million at the time) for a 'minor overspend' in 2021.

The winner is the first to cross the finish line and points are awarded based on top ten positions — the one with the most at the end of the year is crowned World Champion. In 1950 there were seven championship rounds, but as the sport has grown, next year will feature 24 races.

Generally, the cap relates to a team's spending that impacts the performance of the race car (excluding the engine, which is subject to a separate set of regulations). Perhaps the most notable excluded costs are the driver salaries and the salaries of the three highest-paid staff members.

What happens if you go over the F1 cost cap? It depends on how much you go over the cap, but if a team is found to have gone over, they will not be issued with a certificate of compliance, and a panel of independent judges decide on the appropriate punishment.

In October Red Bull was given a $7 million fine and a 10% reduction in wind tunnel testing time as punishment for breaching the 2021 budget cap of $145m by $1.8m.

Last year the FIA, concluded that Red Bull "did not act in bad faith, dishonestly or in a fraudulent manner" when it broke the budget cap in the 2021 season where Max Verstappen beat Mercedes' Lewis Hamilton to the world championship. The team entered into a so-called Accepted Breach Agreement with F1's governing body.

Subtracting F1's $402 million of cash from its $2.9 billion of loans gives it $2.5 billion of net debt. F1's loan covenant states that its net debt must not be more than 8.25 times its operating profit, which gives it a threshold of $303 million. It has never been at risk of slipping below this level until now.

Max Verstappen, the reigning F1 champion, secured a jaw-dropping $110 million following his dominant performance in the 2023 season, winning an astounding 86% of the races. With bonuses and endorsem*nts factored in, Verstappen's net worth soared to approximately $165.5 million.

Do F1 drivers get paid if they win? ›

Drivers typically receive a base salary plus bonuses for points scored or for race or championship wins, with the bonus amount depending on the size of the team and the experience of the driver. Off-track compensation, including endorsem*nts, is not included in this ranking.

Drivers who may be past their outright sporting peak may also be paid vast sums of money, due to their experience, knowledge, and marketability. For now, driver salaries are not included in the Formula 1 budget cap, meaning teams can spend as much as they like in order to attract the best drivers in the world.

The sixth season of the Netflix docuseries provides fans with an in-depth view of the F1 paddock. Subsequently, the show allows fans to hear interesting conversations from drivers. George Russell and Lando Norris even revealed that a few drivers on the grid drink alcohol during race weekends.

Each team will receive a certificate of compliance for meeting the cap between 1 January 2022 and 31 December 2022, which stands at a base of $135 million plus extras.

The cost cap was $135m (£106m) in 2023 and remains the same for both 2024 and 2025. Previously, the budget was $140m (£110m) for 2022 and $145m (£114m) for 2021. In the long term, the FIA has placed a ban on 2026 car development.

In 2023, the cost-cap dropped by a further $5m to $135m (£122m), but this was also based on a 21-race season. A $1.8m (£1.43m) allowance for each additional grand prix takes this year's total to $138.6 (£110.4m) — the cancellation of the Emilia Romagna Grand Prix doesn't affect this calculation.