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Why do I get a 25% top-up when the basic tax rate is 20%?

Updated over a month ago

If you're a basic rate taxpayer, you pay 20% tax on your income. That means for every £100 you earn, you keep £80 after tax.

To add that £20 back into your pension, HMRC tops up your £80 contribution by 25% — which brings your total pension contribution back to £100.

Here’s how it works:

  • You contribute £80 from your take-home pay

  • HMRC adds £20 in tax relief

  • Your pension receives £100 in total

Want to dive deeper? Check out this page where we explain pension tax relief in more detail.

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