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Accounting
Tax Expense
The total tax cost shown on the income statement for the period, including both current and deferred tax.
Tax expense is not the same as cash tax paid. It follows the matching principle so profit is shown after the full tax cost. The difference between tax expense and cash tax paid creates deferred tax balances on the balance sheet.
It's the full tax bill the company records in its profit and loss account — even the part it hasn't paid yet.
Real world: A company makes £10 million profit. It calculates £2.2 million current tax payable this year plus £300,000 deferred tax. Total tax expense recorded is £2.5 million, reducing reported profit accordingly.
💡 Tax expense is the true tax cost of earning profit this year.