If Leah pays €25,000 to her pension in December but can only claim tax relief on €20,000 in that year, what happens to the remaining €5,000?

• A. She can carry it forward and claim tax relief on it in 2021 against her income from this employment
• B. She can backdate it for tax relief purposes to 2019
• C. It is refunded to her by the scheme administrator at the end of the year
• D. She cannot get tax relief on it

Answer: (A)

The key idea is that tax relief on pension contributions can be limited in a given year by your earnings, and any unused relief can be carried forward to future years. If you contribute more than you can claim in the current year, the excess relief isn’t paid back in cash or retroactively; it stays available to reduce tax in a future year when you have enough eligible earnings.

In this scenario, €20,000 of relief is claimed this year. The remaining €5,000 can be carried forward and claimed in a future year (for example against income in the next year). This ensures the total relief you’re entitled to isn’t lost, but is applied when you have sufficient earnings to support it.