Is deferring tax legal?

Yes, using legitimate reliefs like pensions and EIS is legal tax planning, not avoidance.

What is the best way to defer tax?

Pension contributions offer the most widely available deferral with added tax relief benefits.

Does deferring tax eliminate it?

Usually no - the tax is payable later, though pensions can result in lower total tax if you withdraw at lower rates.

Can I defer CGT indefinitely?

EIS deferral lasts until you dispose of the EIS shares or they become worthless.

What about timing income?

Self-employed can choose accounting dates to affect when profits are taxed - consider carefully.

General2026/27

What is Deferring Tax? UK Definition 2026/27

Written by Waqas Sagar ACA, FCCA, FMAAT

•

Verified by ICAEW, ACCA & AAT

•Updated April 2026

Quick Answer

Legal strategies to delay paying tax to a later date for cash flow benefits.

Definition of Deferring Tax

Deferring tax means using legitimate strategies to delay when tax becomes payable. Common methods include pension contributions (tax relief now, tax on withdrawal later), Enterprise Investment Scheme (defer CGT by reinvesting), and timing of income/expenses across tax years. Deferral improves cash flow but doesnt eliminate the tax liability.

Deferring Tax — Key Facts for 2026/27

Pension contributions	Tax-free going in, taxed on withdrawal
EIS CGT deferral	Reinvest gain, defer CGT
Business year end	Affects when profits taxed
Interest benefit	Keep money working longer

How Deferring Tax Works — Example

EIS CGT deferral

1Capital gain realised: £100,000
2CGT due at 24%: £24,000
3Invest in EIS company: £100,000
4CGT deferred: £24,000 (not due until EIS disposed)
5Cash flow benefit: £24,000 retained

How Deferring Tax Affects Your Tax

Deferring tax improves cash flow and allows money to grow longer before tax is paid. The time value of money means deferral has real economic benefit. However, rates may change - deferring could mean paying at higher rates later.

Official HMRC Guidance on Deferring Tax

For official guidance, refer to HMRC's documentation. Tax rules can change, so always verify current rates and thresholds on gov.uk.

HMRC: Venture capital schemes

Frequently Asked Questions about Deferring Tax

Related Tax Terms

Pension Tax Relief

Tax benefits on pension contributions - effectively the government tops up your pension.

EIS

Enterprise Investment Scheme - 30% income tax relief for investing in qualifying companies.

Capital Gains Tax

Tax on profit when you sell or dispose of an asset that has increased in value.

Accuracy Note

This information is for guidance only and is based on 2026/27 tax year rates. Tax rules are complex and your circumstances may differ. For personal advice, consult a qualified accountant or tax adviser.