In 2021 Formula 1 introduced a cost cap to limit the amount of money a team can spend in a single season, referred to as the cost cap.
The cost cap was imposed at $145,000,000.00 in 2021 and is reduced by $5.0m per year for the next two years to settle at $135,000,000.00. It does have a mechanism to adjust for inflation.
This budget is for all performance aspects of the team but excludes driver salaries and non-performance items like marketing, entry fees and travel. It also excludes the salaries of the three top paid team members.
The cost cap also excludes the engine supply.
The intention of this is to level the playing field where, previously, the big teams have had significant financial resources allowing them to replace parts or develop their cars at a rapid pace throughout the season. The smaller teams with limited resources were then further penalised and had less chance of competing on a level playing field.
And remember, this is a cap on the teams spending, there will be teams who's budgets remain well below this level.
While the cost cap had been in planning for some time, its implimentation in 2022 was possibly a critical factor to the sustainability of the sport during the global pandemic.
Get a detailed explanation in Anna Duxbury's Autosport article here