Budget Cap (Cost Cap)

The Budget Cap (officially the Cost Cap) is a financial regulation introduced to Formula 1 in 2021 that limits the amount teams can spend on car development and racing operations. The initial cap was set at $145 million per year, reducing to $140 million in 2022 and $135 million in 2023. The cap excludes certain items including driver salaries, the top three staff salaries, marketing costs, and engine development. The Budget Cap was introduced to reduce the financial disparity between the wealthiest and poorest teams, making the sport more competitive. Red Bull Racing was found to have exceeded the cap by $2.6 million in 2021, resulting in a $7 million fine and a 10% reduction in wind tunnel testing time.

The Budget Cap was first proposed in 2009 but was rejected by the major teams. It was finally agreed as part of the Concorde Agreement signed in 2020 and came into effect in 2021. The cap has been credited with making the sport more competitive — smaller teams like Aston Martin and Alpine have been able to close the gap to the top teams.