The UK government recorded its biggest ever budget surplus after big increases in self-assessment and capital gains tax receipts, official figures show.
According to the Office for National Statistics, the chancellor, Rachel Reeves, ahead of her Spring Statement next month, recorded a surplus of £30.4bn for the public sector at the start of the financial year. This is double the surplus recorded in January 2025.
The figure was the biggest for January since records began in 1993 and well above the £24bn forecast by the Office for Budget Responsibility, the government’s official forecaster, and a poll of city economists.
Paul Dales, chief UK economist at Capital Economics, said: “The economy is starting to look very healthy and that gives the chancellor an opportunity to signal something positive in her economic statement on March 3.”
The figure represents a sharp reversal from December, when public sector net borrowing – the difference between expenditure and income – was £11.6bn.
Grant Fitzner, chief economist at the ONS, said: “January – traditionally a strong month for self-assessment tax receipts – saw the largest surplus since monthly records began.
“Revenues rose sharply over the same period last year, but spending was little changed, with lower debt interest payments offsetting higher spending on public services and benefits.”
This year’s increase in capital gains tax receipts has increased, along with a general progression from self-assessment tax receipts to public finances in January, due to an increase in people disposing of assets ahead of the widely expected capital gains tax hike in the 2024 Autumn Budget.
Capital gains tax came in at £17bn last month, nearly £7bn more than a year ago, taking self-assessed tax receipts to a total of £29.4bn.
There is also a freeze in income tax thresholds from 2022, meaning more people are drawn into a higher tax bracket over time due to inflation.
The surplus meant a deficit for the first 10 months of the year of £112.1bn, lower than the OBR forecast of £120.4bn, giving the Chancellor little relief.
However, Henning Diederichs, senior technical manager for the public sector at the Institute of Chartered Accountants in England and Wales, said public finances remained in a difficult position ahead of the spring statement despite record surpluses.
“The budget overrun is significant, re-emphasizing the weak financial position that the government needs to borrow,” he said.
Martin Beck, chief economist at WPI Strategy, said borrowing for the financial year was now expected to reach £130bn, which was “worrying for the economy as both the OBR and the Bank of England are close to full capacity”.
With the national debt hitting 92.9% of gross domestic product in January, a level not seen since the early 1960s, Reeves made reducing government debt a priority. With £1 out of every £10 the government spends on debt interest, the cost of servicing that debt is high.
James Murray, Chief Secretary to the Treasury, said: “We have a sound plan to build a stronger, more secure economy. We have doubled our headroom, we have reduced inflation, we are spending taxpayers’ money wisely and borrowing this year is expected to be the lowest since before the pandemic.”
