F1 cost cap: How Red Bull broke it, their punishment, and the latest news on 2025 budget

What is the F1 cost cap and why was it introduced?

F1 introduced the first-ever set of financial regulations for 2021 in a bid to encourage a more competitive championship. 

The hope was that by enforcing a limit on spending, F1 would help level the playing field more by enabling smaller teams with less resources to compete in an even environment against teams boasting huge budgets. 

Some teams were previously known to be spending upwards of $400m per season. 

The other main goal behind the implementation of the budget cap was to ensure a financially-sustainable sport. 

The cap works by limiting the amount of money an F1 team can spend over the course of a calendar year to avoid spiralling costs. 

Any team found guilty of overspending will face a penalty.

How much is the cost cap? 

Originally, the 2021 budget cap was to be set at $175m, but that was cut down to $145m to help teams struggling as a result of the COVID-19 pandemic, which placed greater emphasis on the need for F1 to slash costs. 

The cap was reduced to $140m for 2022, with plans to further cut the limit down to $135m for the 2023 season until 2025.

These figures are based on a 21-race season and will be adjusted accordingly, with an extra $1.2m allowance for each race over that threshold.

The FIA agreed to a 3.1 percent raise for the 2022 cost cap due to the impact soaring inflation was having on the teams’ budgets. 

The cap for 2026 is set to be raised to $215m to accommodate Audi's higher salaries in Switzerland.

The new $215m figure will now include several items in the new cap that were previously exempted.

What is included under the cost cap? 

Expenditure that falls under the cost cap includes: 

• All parts on the car (from the steering wheel to the wheel nuts)
• All the elements needed to run the car
• Most of the team personnel
• Garage equipment
• Spares
• Transport costs
• Everything in between

What isn’t included under the cost cap?

Expenditure that does not fall under the cost cap includes:

• F1 driver salaries
• The wages of the three highest-paid staff members
• Travel costs
• Marketing spend
• Property and legal costs
• Entry and licence fees
• Any non-F1 or road car activities
• Parental and sick leave payments
• Employee bonuses and staff medical benefits

How did Red Bull break the rules? How were they punished?

The FIA found Red Bull guilty of a "minor" overspend of the 2021 $145m budget, while Verstappen was wrapping up the 2022 title, in a huge end-of-season scandal. Team principal Christian Horner claimed the overspend did not affect their performance.

Red Bull were hit with a $7m fine and a 10 percent reduction in aero testing for 2023 as punishment.

Thirteen areas were "incorrectly interpretated" by Red Bull, including staff catering.

Red Bull are dominating in 2023 despite their punishment, leading Lewis Hamilton to criticise: “I mean, there wasn't really a big punishment last time, so there's no real [deterrent].

“There will be people that will probably go for it again and know they're just going to get a slap on the wrist.”

Why were Honda and Alpine fined for engine cap breach?

Honda and Alpine/Renault were hit with fines for procedural breaches of the FIA’s engine cost cap rules.

Honda had to pay $600,000, while Alpine’s fine was $400,000.

The Japanese manufacturer failed to report accurate reporting documentation.

Alpine’s fine was slightly smaller because it was late in sending the FIA documents.

"The CCA [Cost Cap Administration] confirms that although Alpine Racing SAS and HRC have both been found to be in procedural breach, neither have exceeded the Cost Cap level," read an FIA statement.

"Both Alpine Racing SAS and HRC have acted at all times in good faith and are currently co-operating with the CCA to finalise the matter. Considering the nature of the breach, the complexities of the new Financial Regulations for PU Manufacturers and the challenges associated with their first year of implementation it is the CCA's intention to propose to these two PU Manufacturers to settle their respective breaches by means of an Accepted Breach Agreement (ABA)."

The engine cost cap is $95m (2022-2025) and will rise to $130m from 2026.

How can the teams save money? 

Teams have already been forced to cut back on staffing levels in order to make savings. 

Christian Horner revealed Red Bull have had to make over 90 people redundant, while Mercedes have laid off 40 members of staff. 

Teams also have to factor in potential accident damage. 

One of the most effective cost-saving measures is to cut back on development and reduce manufacturing time, something that will hit the big teams the hardest. 

Lewis Hamilton claimed that he would have won the 2021 world title if Mercedes had spent an extra $300,000 on upgrades such as “a new floor or an adapted wing”.