UK reports record-breaking budget surplus of £30.4bn in surprise boost for Rachel Reeves | Tax and spending
Official figures show the UK government has announced its biggest budget surplus ever, following a huge increase in self-assessment and capital gains tax revenues.
Chancellor Rachel Reeves has been given a boost by public sector finances posting a surplus of £30.4bn at the start of the year, according to the Office for National Statistics (ONS), ahead of her spring announcement next month. This was £15.9bn higher than the surplus recorded in January 2025.
The figure is the largest January total since records began in 1993 and is much higher than the £24bn estimate made by the Office for Budget Responsibility, the government’s official forecaster, and a survey of City economists.
This marks a sharp turnaround from December, when public sector net borrowing (the difference between spending and income) was £11.6bn.
ONS chief economist Grant Fitzner said: “January, traditionally a strong month for personal tax receipts, saw the largest surplus since monthly records began.
“While revenues rose strongly in the same period last year, there was little change in spending due to lower debt interest payments, which largely offset higher costs on utilities and benefits.”
The surplus meant the budget deficit for the first 10 months of the year was £112.1bn; This was less than the £120.4bn the OBR had predicted and provided some further relief for the chancellor.
The government traditionally runs a surplus in January; This means that it gains more in tax revenue than it spends due to recording self-assessment tax revenues during the month.
But this year it has been boosted by an increase in capital gains tax revenues due to an increase in the number of people disposing of assets ahead of what they predicted would be an increase in capital gains tax in the autumn 2024 budget.
Reeves announced in his October 2024 budget that he would increase the low CGT rate from 10% to 18% and the high CGT rate from 20% to 24%, with these increases taking effect immediately.
There has also been a freeze on income tax thresholds since 2022, meaning that over time more people are being moved into a higher tax bracket due to inflation.
Alongside these two factors, there have also been increases in national insurance contributions and higher wage increases introduced last April.
James Murray, principal secretary to the Treasury, said: “We have the right plan to build a stronger, more secure economy. We have doubled our headroom, we are reducing inflation, ensuring taxpayers’ money is spent wisely and borrowing this year is expected to be the lowest since before the pandemic.”
“We know there is more to do to stop one in every £10 the government spends going towards interest on debt, and we will cut borrowing by more than half by 2030-31 so the money can be spent on the police, schools and the NHS.”
Reeves has made reducing government borrowing a priority, with the national debt reaching 92.9% of gross domestic product in January, a level not seen since the early 1960s. The cost of paying off this debt is high; For every £10 the government spends, £1 goes towards debt interest.
