UK Corporation Tax Sensitivity: Temporary Differences Are Not Tax Balances
A hypothetical 27% sensitivity is not an enacted UK rate. Distinguish gross temporary differences from tax-effected DTA and DTL balances when modelling.
Editorial source review — November 1, 2026. This machine-generated article has been reviewed, but is not certified accurate. Source-backed corrections are incorporated where established. Other legal, survey and product claims may remain unverified; check applicable primary authorities before relying on a deadline or tax position.
Findings in the original version: EY's pre-Budget option is a hypothetical 27%, not an enacted rate. The examples conflate gross temporary differences with tax-effected balances.
The 27% corporation-tax scenario discussed in pre-Budget commentary is a hypothetical sensitivity, not an enacted rate established by that commentary. Retain the historical context rather than presenting speculation as a new tax law.
Use consistent units
Illustration only: £400 million of taxable temporary differences measured at 25% produces a £100 million DTL before other considerations. At a hypothetical 27%, the same differences would produce £108 million. Calling the £400 million itself a DTL would confuse the tax base with the tax-effected balance.
Similarly, £200 million of deductible temporary differences at 25% gives a £50 million gross DTA. A £200 million DTA balance measured at 25% instead corresponds to £800 million of deductible temporary differences and would become £216 million at 27%, before realisability or other adjustments. State explicitly which quantity is being modelled.
Do not book a hypothetical rate
Use the actual enacted rate and applicable reversal assumptions for US GAAP measurements. Other reporting frameworks have their own requirements; an announcement should not be assumed to satisfy substantive enactment without checking the relevant standard and legislative process. The official Budget OOTLAR should be read together with enacted legislation, not treated as a substitute for it.