157 Vodafone Group Plc Annual Report 2026
Strategic report
Governance
Financials
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5. Investment income and financing costs Investment income comprises interest received from investments and other receivables. Financing costs mainly arise from interest due on bonds and commercial paper issued, bank loans and the results of hedging transactions used to manage foreign exchange and interest rate movements. 2026 2025 2024 €m €m €m Investment and other income Financial assets measured at amortised cost 1,200 355 327 Financial assets measured at fair value through profit and loss 195 509 254 1,395 864 581 Financing costs Financial liabilities measured at amortised cost Bonds 1,418 1,301 1,596 Lease liabilities 615 488 440 Bank loans and other liabilities 1 416 499 712 Interest on derivative and other financial instruments (235) (356) (395) Mark-to-market on derivatives 217 (2) 100 Foreign exchange (56) 1 173 2,375 1,931 2,626 Net financing costs 2 980 1,067 2,045 Notes: 1. Interest capitalised for the year ended 31 March 2026 was €nil (2025: €nil, 2024: €nil). 2. Includes €771 million gain (2025: €253 million gain) resulting from redemption of certain bonds that were bought back in advance of their maturity dates.
6. Taxation This note explains how our Group tax charge arises. The deferred tax section of the note also provides information on our expected future tax charges and sets out the tax assets held across the Group together with our view on whether or not the Group expects to be able to make use of these in the future. Accounting policies Income tax expense represents the sum of current and deferred taxes. Current tax payable or recoverable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because some items of income or expense are taxable or deductible in different years or may never be taxable or deductible. The Group’s liability for current tax is calculated using tax rates and laws that have been enacted or substantively enacted by the reporting period date. The Group recognises provisions for uncertain tax positions when the Group has a present obligation as a result of a past event and management judge that it is probable that there will be a future outflow of economic benefits from the Group to settle the obligation. Uncertain tax positions are assessed and measured on an issue-by-issue basis within the jurisdictions that the Group operates either using management’s estimate of the most likely outcome where the issues are binary, or the expected value approach where the issues have a range of possible outcomes. The Group recognises interest on late paid taxes as part of financing costs, and, if applicable, classifies tax penalties as part of the income tax expense if the penalties are based on profits. Deferred tax is the tax expected to be payable or recoverable in the future arising from temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. It is accounted for using the statement of financial position liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable temporary differences or taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of assets and liabilities (other than in a business combination), when the transaction affects neither the accounting profit nor the taxable profit and does not give rise to equal taxable and deductible temporary differences. Deferred tax liabilities are also not recognised to the extent they arise from the initial recognition of goodwill that is not deductible for tax. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint arrangements, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each reporting period date and adjusted to reflect changes in the Group’s assessment that sufficient taxable profits will be available to allow all the recognised asset to be recovered.
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