Public revenues exceeded spending by £30.4 billion last month, the biggest surplus since monthly records began in 1993. The figure surpassed City analysts’ forecast of £23.8 billion and more than doubled the £14.5 billion surplus recorded in January 2025.
January traditionally delivers robust tax inflows as households file self-assessment returns. Income tax receipts rose by £12 billion, while national insurance contributions jumped £2.9 billion following last year’s increase in payroll levies. Overall revenue climbed nearly 14 per cent compared with January 2025, reaching £133.3 billion.
A key factor behind the record surplus was a dramatic fall in debt interest payments, which fell to £1.5 billion in January from £9.1 billion in December. The reduction in borrowing costs helped offset higher spending on public services and welfare.
Grant Fitzner, ONS chief economist, said: “Revenue was strongly up on the same time last year, while spending remained largely unchanged. Lower debt interest payments played a major role in generating this historic surplus. Across the first ten months of the current financial year, borrowing is lower than the same period a year ago.”
Compared to the Office for Budget Responsibility’s (OBR) November budget forecasts, the public finances are in a stronger position than expected. The government borrowed £112.1 billion in the ten months to January, 11.5 per cent less than the £120.4 billion forecast and below last year’s figures.
Chancellor Rachel Reeves is not expected to announce tax increases or spending cuts in the upcoming spring statement. Several policy adjustments, including moderating a business rates rise for pubs and softening an inheritance tax increase on farms and certain businesses, have reduced the £22 billion fiscal headroom outlined in the budget. However, lower borrowing costs have partially offset these changes.
Dennis Tatarkov, senior economist at KPMG UK, said: “Weaker-than-expected growth in the second half of 2025 has reduced the chancellor’s fiscal buffer, but falling interest rates have helped cushion the impact.”
James Murray, Chief Secretary to the Treasury, emphasised the government’s approach: “We are ensuring taxpayers’ money is spent wisely. This year’s borrowing is forecast to be the lowest since before the pandemic, and our plan is focused on building a stronger, more secure economy.”
