Taxation

  2007
£m		 2006
£m 		2005
£m
Tax 2,052 2,689 2,378
       
  % % %
UK corporation tax rate 30.0 30.0 30.0
Effective tax rate 20.7 29.3 30.0

The actual tax charge differs from the expected tax charge computed by applying the standard rate of UK corporation tax as follows:

  2007
£m		 2006
£m		 2005
£m
Expected tax charge 2,970 2,756 2,381
Non-deductible items 263 288 309
Non-taxable items (595) (251) (166)
Taxable foreign exchange movements 16 5 (10)
Reduction in deferred tax liability following change in the rate of UK Corporation Tax (189) – –
Foreign profits taxed at other rates (37) 63 77
Unutilised losses – brought forward and carried forward (9) 14 (5)
Adjustments in respect of prior periods (367) (186) (208)
Actual tax charge 2,052 2,689 2,378

The effective tax rate for the year was 20.7% (2006 – 29.3%; 2005 – 30.0%). The headline rate is lower than the standard rate of UK corporation tax of 30% principally due to certain non-taxable capital gains, changes to deferred tax balances following the change in rate of corporation tax and release of tax provisions following the finalisation of prior year issues.