Mooshakes

I don't think the above response addresses the question posed by the other user but I think I know where that £1,000 has gone. The £7,500 * 20% higher rate tax relief i.e. £1,500 is being paid back as cash so effectively is "income" as it does not get put into the pension. Therefore you effectively end up paying the 40% higher rate tax on it i.e. the difference between £10,000 and £7,500 so £2,500 * 40% = £1,000 tax leaving you with £1,500 as cash.