Public sector finances UK - January 2025

21st February 2025

Each January, tax receipts are always higher than in other months, because of receipts from self-assessed taxes; this often leads to a surplus whereby income exceeds expenditure rather than borrowing.

Initial estimates show that the public sector was in surplus by £15.4 billion in January 2025; this was a £0.8 billion larger surplus than last year, and the highest January surplus since monthly records began in 1993.

The current budget balance - receipts less the cost of day-to-day public sector activities - was in surplus by £24.6 billion in January 2025; this was a £0.7 billion larger surplus than last year and the highest January budget surplus since monthly records began in 1997.

Combined self-assessed income and Capital Gains Tax receipts were provisionally estimated at £36.2 billion in January 2025, £3.8 billion more than a year earlier, and the highest January receipts since monthly records began in 1999.

Borrowing in the financial year to January 2025 was £118.2 billion; this was £11.6 billion more than at the same point in the last financial year and the fourth-highest financial year-to-January borrowing since monthly records began in 1993.

Public sector net debt excluding public sector banks was provisionally estimated at 95.3% of gross domestic product (GDP) at the end of January 2025; this was 0.1 percentage points more than at the end of January 2024, and remains at levels last seen in the early 1960s.

Public sector net financial liabilities excluding public sector banks were provisionally estimated at 82.7% of GDP at the end of January 2025; this was 2.0 percentage points more than at the end of January 2024, but 12.6 percentage points less than for public sector net debt.

Central government net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was in surplus by £15.2 billion in January 2025, a £4.3 billion smaller surplus than in January 2024.

Borrowing in January 2025
In January 2025, initial estimates show that the public sector received more in taxes and other income than it spent, leading to a surplus of £15.4 billion.

This was a £0.8 billion greater surplus than in January 2024 and the highest January surplus since monthly records began in January 1993.

However, this was a £5.1 billion smaller surplus than the £20.5 billion forecast for January 2025 by the Office for Budget Responsibility in October 2024.

Public sector borrowing consists of two broad components: the current budget and net investment.

The current budget, which is usually in deficit, can be considered as borrowing to fund day-to-day public sector activities. Initial estimates show that in January 2025, the current budget was in surplus by £24.6 billion. This was a £0.7 billion greater surplus than in January 2024 and the highest January surplus since monthly records began in 1997.

The public sector's net (capital) investment was £9.1 billion in January 2025, £0.1 billion less than in January 2024.

Central government borrowing
Central government forms the largest part of the public sector and includes government departments such as HM Revenue and Customs, the Department of Health and Social Care, the Department for Education, and the Ministry of Defence, as well as other government agencies.

The relationship between central government's receipts and expenditure is an important determinant of public sector net borrowing. Central government was in surplus by £13.8 billion in January 2025, around 90% of the £15.4 billion surplus of the whole public sector.

Central government current receipts
Central government's receipts were £117.6 billion in January 2025, £7.8 billion more than in January 2024. Of this £7.8 billion increase in income:

central government tax receipts increased by £7.7 billion to £97.0 billion; this included increases of £6.9 billion in Income Tax and £0.4 billion in Corporation Tax, with Value Added Tax (VAT) receipts largely unchanged

compulsory social contributions decreased by £0.2 billion to £14.5 billion

Self-assessed tax receipts
Each January, accrued receipts are always higher than in other months, because of self-assessed (SA) taxes.

In January 2025, SA Income Tax receipts have been provisionally estimated at £25.9 billion, £4.2 billion more than in January 2024, but £3.0 billion less than the £28.9 billion forecast by the Office for Budget Responsibility (OBR) in October 2024.

SA Capital Gains Tax receipts have been provisionally estimated at £10.3 billion, £0.3 billion less than in January 2024 and £1.1 billion less than the £11.4 billion forecast by the OBR in October 2024.

Tax payments made close to the deadline, and the time taken for those to then appear in administrative data, mean that the proportion of self-assessed taxes recorded in January and February can vary year-on-year. Therefore, it is advisable to consider these two months together when making annual comparisons.

Central government current expenditure
Central government spending data for January 2025 are provisional. There is uncertainty around these estimates until more detailed departmental information becomes available later in the financial year.

Central government's total expenditure was £103.8 billion in January 2025, £1.8 billion more than in January 2024. Of this overall £1.8 billion increase in spending:

central government departmental spending on goods and services increased by £2.6 billion to £36.8 billion, as pay rises and inflation increased running costs

net social benefits paid by central government increased by £2.5 billion to £26.2 billion, largely caused by inflation-linked increases in many benefits and pensions

interest payable on central government debt increased by £2.0 billion to £6.5 billion, largely because the interest payable on index-linked gilts rises and falls with the Retail Prices Index (RPI)

payments to support the day-to-day running of local government increased by £0.8 billion to £11.5 billion; these intra-government transfers are both central government spending and a local government receipt, so they have no effect on overall public sector borrowing

Central government net investment
Central government net investment was £13.7 billion in January 2025, £6.2 billion less than in January 2024.

This decrease was largely because of a £5.8 billion reduction in the quarterly payment from HM Treasury to the Bank of England (BoE) Asset Purchase Facility (APF) Fund compared with a year earlier.

These intra-public sector transfers have no impact on overall public sector borrowing because they are recorded as both central government spending and Bank of England receipts.

Interest payable on central government debt
The interest payable on central government debt was £6.5 billion in January 2025.

This was £2.0 billion more than in January 2024 and was the highest January interest payable since 2023, when it was £6.9 billion, and the second-highest January figure since monthly records began in 1997.

Read the full ONS report HERE