Britain posted its biggest monthly budget surplus on record in January as rising tax revenues and a sharp fall in debt interest costs boosted public finances.
Figures from the Office for National Statistics show government revenue exceeded spending by £30.4 billion in January, the largest surplus since monthly records began in 1993 and well above City forecasts of £23.8 billion.
January is typically a busy month due to self-assessment tax payments, but this year’s figure far exceeded the £14.5 billion surplus recorded in January 2025.
The improvement was partly due to a sharp fall 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 following market volatility last year.
Total government revenue rose almost 14 percent year-on-year to £133.3 billion. Income tax receipts rose by £12 billion while National Insurance contributions rose by £2.9 billion after higher payroll taxes were introduced last spring.
Grant Fitzner, chief economist at the ONS, said January produced its largest surplus on record, with revenue increases offsetting higher spending on public services and welfare benefits.
In the first ten months of the financial year, borrowing totaled £112.1 billion – 11.5 per cent less than the same period last year and below the Office for Budget Responsibility forecast in the November Budget of £120.4 billion.
The improved position strengthens the Treasury’s position ahead of the spring statement on March 3, although analysts point out that fiscal space remains fragile.
Dennis Tatarkov, senior economist at KPMG UK, said weaker-than-expected growth at the end of 2025 may have eroded some of the government’s £22 billion fiscal buffer, although falling interest rates have provided some compensation.
Chancellor Rachel Reeves is not expected to announce any new tax rises or spending cuts at the spring statement. The government’s U-turn on pub business rates and changes to inheritance tax have limited some of the scope available.
Treasury chief secretary James Murray said the government was ensuring taxpayers’ money was spent wisely and that borrowing this year was on track to reach its lowest level since before the pandemic.
While January’s surplus reflects seasonal factors, the combination of robust tax revenues and falling debt costs is providing a temporary boost to public finances at a critical point in the financial year.
