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  • Higher Rate Tax Relief on Pension Contributions

    I'm trying to understand the workings of how higher rate tax relief on pension contributions where tax relief at source in place. Assuming pension contributions of £6,000 paid after income tax at 40%, it took £10,000 gross to be paid £6,000 net after income tax. £6,000 is paid into the pension provider, they gross this up with basic tax relief at 20%, Which means an additional £1,500 is claimed back and added to pension fund. When you claim higher rate tax relief you get an additional 20%, which is another £1,500 £6,000 + £1,500 + £1,500 = £9,000 This is an effective 33% tax relief rather than 40%. Have I misunderstood this somewhere?