More cash than ever has been left over within the public funds as a result of extra tax being paid, official figures present.
January had the largest finances surplus since information started in 1993, in keeping with information from the Workplace for Nationwide Statistics (ONS).
It meant the federal government acquired more cash than it spent final month, leaving £30.4bn left over.
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It is £15.9bn greater than the excess in January 2025, though the figures usually are not adjusted for inflation.
The excess is even increased than anticipated by unbiased forecasters the Workplace for Finances Accountability (OBR) – about £6.3bn larger.
Why?
Whereas there was little change in authorities spending, the highest-ever recorded surplus resulted from income being “strongly up” and decrease rates of interest, the ONS mentioned.
Self-assessed tax revenues have been practically £6bn greater than deliberate for and capital good points tax receipts surged.
Decrease rates of interest have meant borrowing cash value much less.
The price of borrowing was £1.5bn within the month, £5bn decrease than the time final 12 months.
A reduction for Reeves
It has been described as a “welcome reduction” and “excellent news” for Chancellor Rachel Reeves by analysts from Huge 4 accounting agency PWC and financial analysis agency Pantheon Macroeconomics.
“This decline eases rapid stress on the general public funds”, PWC’s economist Nabil Taleb mentioned.
Paying extra on debt can imply public funds are extra uncovered to financial shocks.
However the path forward isn’t with out hazards for Ms Reeves.
The room she has to spend cash earlier than breaking her self-imposed fiscal guidelines – to convey down authorities debt and steadiness the finances by 2030 – has narrowed for the reason that November finances.
Decrease gross home product readings, a key financial measure, could have already got eroded the sums Ms Reeves has to spend earlier than breaking her fiscal guidelines.
Anaemic economic growth and a rising unemployment rate may imply tax takes stall.
And the January tax income figures might be a one-off.
The month is vital for the exchequer due to the inflow of self-assessed earnings tax receipts.
Additional proof economic system ‘picked up neatly’
Excellent news for the economic system additionally got here within the type of retail gross sales, which recorded a much better than anticipated January.
The whole quantity of retail gross sales, which measures the amount purchased, elevated by 1.8% final month, the ONS mentioned.
It was the biggest improve since Could 2024.
There continued to be “robust” gross sales at on-line jewellers as they reported “demand had hit unprecedented ranges”, the ONS added.
Additionally promoting nicely have been artworks, furnishings and know-how,
This information gave “additional proof that financial progress picked up neatly within the New 12 months as finances uncertainty fades”, Pantheon’s chief UK economist Rob Wooden mentioned.
Retail gross sales figures matter as they measure family consumption, the biggest expenditure within the UK economic system.
