Glossary

Deferred tax

Deferred tax recognises tax that will arise later from timing differences between the accounts and tax — an accounting figure, not a cash payment.

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Timingdifferences

Futuretax effect

Definition

Deferred tax is an accounting adjustment recognising tax that will arise in future because of timing differences between how items are treated in the accounts and for tax — most commonly from depreciation versus capital allowances.

In plain terms

It reflects tax bills (or savings) building up now that will actually crystallise later, because the accounts and the taxman recognise things at different times. It is an accounting figure, not a payment.

Why it matters for your company

Deferred tax appears on the balance sheet and can puzzle first-time readers. It matters when interpreting accounts — a large deferred-tax liability signals future tax the headline figures do not yet show. It is a technical but real part of a true-and-fair picture.