UK businesses will have to pay 78% of the extra tax the government expects to raise each year by slashing salary sacrifice pension contributions, shows new data from Bowmore Wealth Group, with an annual bill of £2.9bn as a result of the changes.

The figures are based on a Freedom of Information (FoI) response from the Treasury showing how the expected tax yield is split between employers and employees averaged over tax years 2029-30 and 2030-31.

Individuals are expected to pay 22%, or £800m, of the increased tax bill with businesses footing the majority of the tax burden at £2.9bn.

The measure was first announced at Budget 2025 by former chancellor Rachel Reeves, raising concerns the move would reduce pension contributions once individuals and businesses calculated the tax impact. The original rationale for the change was to reduce the annual cost of £4.7bn to fund the tax relief, which Reeves told MPs was unsustainable.