Business
Record January surplus boosts public finances as tax receipts surge
Britain recorded its largest monthly budget surplus on record in January as rising tax receipts and a sharp fall in debt interest costs boosted the public finances.
Figures from the Office for National Statistics show government revenues exceeded spending by £30.4bn in January, the highest surplus since monthly records began in 1993 and well above City forecasts of £23.8bn.
January is typically a strong month for receipts because of self-assessment tax payments, but this year’s figure far surpassed the £14.5bn surplus recorded in January 2025.
The improvement was driven partly by a steep drop in debt interest payments, which fell to £1.5bn from £9.1bn in December. Lower borrowing costs have eased pressure on the Treasury’s balance sheet after last year’s market volatility.
Total government revenues rose nearly 14 per cent year-on-year to £133.3bn. Income tax receipts increased by £12bn, while national insurance contributions rose by £2.9bn following higher payroll levies introduced last spring.
Grant Fitzner, chief economist at the ONS, said January had delivered the strongest surplus since records began, with revenue gains offsetting higher spending on public services and benefits.
Across the first ten months of the financial year, borrowing totalled £112.1bn — 11.5 per cent lower than the same period a year earlier and below the £120.4bn forecast by the Office for Budget Responsibility at the November budget.
The improved position strengthens the Treasury’s hand ahead of the spring statement on 3 March, although analysts caution that fiscal headroom remains fragile.
Dennis Tatarkov, senior economist at KPMG UK, said weaker-than-expected growth in late 2025 may have eroded part of the government’s £22bn fiscal buffer, though falling interest rates have provided some offset.
The chancellor, Rachel Reeves, is not expected to announce fresh tax rises or spending cuts at the spring statement. Government U-turns on business rates for pubs and inheritance tax changes have narrowed some of the available headroom.
James Murray, chief secretary to the Treasury, said the government was ensuring taxpayers’ money was spent wisely and that borrowing this year was on track to be the lowest since before the pandemic.
While January’s surplus reflects seasonal factors, the combination of robust tax receipts and easing debt costs provides a temporary lift to the public finances at a critical point in the fiscal year.
Amy Ingham
Amy is a newly qualified journalist specialising in business journalism at Business Matters with responsibility for news content for what is now the UK’s largest print and online source of current business news.