The UK recorded its largest January budget surplus since records began in 1993, driven by a sharp rise in self assessment and capital gains tax receipts.
Official figures from the Office for National Statistics show a surplus of £30.4 billion at the start of the year, double the amount recorded in January 2025 and well above the £24bn forecast by the Office for Budget Responsibility and City economists. The position marks a significant turnaround from December, when public sector net borrowing stood at £11.6bn.
January typically brings stronger public finances due to self assessed tax payments. This year’s figures were further boosted by a surge in capital gains tax receipts, as investors disposed of assets ahead of an anticipated increase in rates in the 2024 Autumn Budget. Capital gains tax raised £17bn in January, almost £7bn more than a year earlier, while self assessed income tax receipts reached £29.4bn.
A continued freeze in income tax thresholds since 2022 has also increased revenues, as inflation pushes more taxpayers into higher bands.
As a result, borrowing for the first 10 months of the financial year totalled £112.1bn, below the OBR’s forecast of £120.4bn. The stronger position offers some headroom for the chancellor, Rachel Reeves, ahead of her Spring Statement.
However, Government debt remains elevated at 92.9% of GDP, its highest level since the early 1960s. Servicing that debt is costly, with around one in every ten pounds of Government spending going towards interest payments.
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