Record January tax surplus of £15.4 billion falls short of City forecasts

The Treasury collected a record tax surplus last month but it still fell well short of City forecasts. The Office for National Statistics (ONS) said tax revenues were £15.4 billion bigger than Government spending in the month.

This was up £0.8 billion on last year and the highest January surplus since monthly records began in 1993. However, it was £5.



1 billion smaller than the £20.5 billion forecast for January 2025 by the Office for Budget Responsibility (OBR) at the time of the October Budget. City commentators said that left the Chancellor with even less fiscal headroom in the run up to the Spring statement next month making it more likely that she will be forced to raise taxes again.

The Government coffers are almost always in surplus in January when millions of taxpayers make their income tax self assessment or capital gains payments to HMRC. Combined self-assessed income and Capital Gains Tax receipts were estimated at £36.2 billion in January, up £3.

8 billion 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; up £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 95.3% of GDP in January.

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.

Alex Kerr , UK Economist at forecaster Capital Economics, said: “ Overall, today’s release will do nothing to reduce the Chancellor’s challenges. Even before the ratcheting up of pressure on European governments to increase defence spending, the Chancellor’s options ahead of the fiscal update next month were bleak. “Higher market interest rate expectations and gilt yields than at the time of October’s Budget alone suggest the Chancellor’s headroom against her fiscal mandate has been whittled down from £9.

9 billion to £2.8 billion.” Alison Ring, director of public sector and taxation, at accounting body ICEAW, said: “The expected boost from self-assessment tax receipts in January was not enough to bring the public finances under control, which will disappoint the Chancellor as she prepares for her first Spring Forecast.

“The latest numbers do not fundamentally change the weak state of the public finances nor the huge pressures on the Chancellor to increase public spending across the board, especially on defence given the situation in Ukraine. “As these numbers will adversely affect the starting point for the Office for Budget Responsibility’s upcoming forecast, it may be more difficult for the Chancellor to keep to her commitment to hold only one fiscal event a year. Further tax rises in March are still unlikely, but their possibility has definitely increased.

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