Premier Rugby, the umbrella organisation responsible for promoting England’s 12 Premiership clubs, also announced similar rises for the 2003-2004 and 2004-2005 campaigns.
The salary cap, currently standing at £1.8million ($2.6m/EUR2.9m) per club, will increase to £1.85m ($2.7m/EUR3m) next season, rising to £1.97m ($2.85m/EUR3.2m) by 2004/2005.
The move comes despite lobbying from top clubs for the removal of salary restraints, arguing that other clubs in Europe do not face such restrictions.
Howard Thomas, acting chief executive of Premier Rugby, said: "The Premier Rugby Board felt it was necessary to review the squad capping levels. The current level has been extremely effective since its introduction three years ago, but a prudent increase is necessary to ensure the Zurich Premiership remains a competitive league."
