The monthly public sector finances published by the Office for National Statistics (ONS) on Friday 20 February 2026 reported a provisional surplus of £30bn in January 2025 reducing the cumulative deficit for the ten months to £112bn, £8bn more than budgeted.

Henning Diederichs, ICAEW Public Sector Senior Technical Manager, said: "Despite self-assessment receipts in January contributing to a sizeable surplus for the month, today's numbers confirm that the public finances continue to be in a difficult position ahead of the Spring Forecast. The positive news is that year-to-date borrowing to fund the deficit is lower than expected and on track to beat the OBR autumn forecast of £138bn for the financial year, based on the government being able to keep spending under control in the final two months of the financial year.

“Nevertheless, the budget overrun remains significant, re-emphasising the weak economic position that is driving the government’s need to borrow.

“The focus for the Chancellor will be on how to stick to her planned reduction in the deficit in the upcoming financial year from April given the significant pressure she is under to find more money for a range of demands, while at the same time avoiding further tax rises and delivering the conditions for businesses to deliver growth.”

Month of January 2026

Receipts of £143bn exceeded public spending of £113bn by £30bn in the month of January, the highest monthly surplus since records began in 1993 (not adjusted for inflation) and a £7bn positive variance against budget. This was £16bn more than the £14bn surplus generated in January last year (£126bn receipts less £112bn spending).

Self-assessment receipts contributed £46bn, comprising £29bn income tax and £17bn capital gains tax. This was £5bn better than budget and £10bn more than the £36bn contributed in January 2025 (£26bn income tax and £10bn capital gains tax).

Receipts excluding January’s self-assessment boost were £97bn, in line with average receipts for the previous nine months, while public spending of £113bn was also in line with the average between April and December 2025. The latter comprised current spending of £102bn (£6bn below the £108bn monthly average from a fall in debt interest) and net investment of £11bn (£6bn above the £5bn monthly average).

The £30bn fiscal surplus for the month combined with a £26bn cash inflow from working capital and lending activities reduced public sector net debt by £56bn from £2,923bn on 31 December 2025 to £2,867bn on 31 January 2026.

10 months to January 2026

The provisional deficit for the first 10 months of the financial year of £112bn was £15bn lower than the £127bn cumulative deficit in the same period last year.

The year-to-date deficit was £8bn more than budget (net of a £7bn positive variance in the month) which can be analysed as an £11bn overrun on the current budget deficit less a £3bn underspend on net investment.

Table 1 highlights how year-to-date receipts of £1,014bn were 8% higher than the same period last year, and how current spending of £1,070bn and net investment of £56bn were each 6% higher.

• Income tax receipts (including self-assessment) were up 8% from a combination of inflation and fiscal drag from frozen tax allowances.
• National insurance receipts were up 19%, reflecting the increase in employer national insurance from April 2025 onwards.
• VAT receipts were up 5%, ahead of consumer price inflation.

The 6% increase in current spending to £1,070bn in the first 10 months has principally been driven by public sector pay rises, higher supplier costs, and the uprating of welfare benefits.

Debt interest of £110bn was £2bn higher than in the first 10 months of 2024/25, comprising a £3bn increase in indexation on inflation-linked debt, less a £1bn decrease in interest on variable and fixed-interest debt. The latter reflects the effect of lower interest rates outweighing a higher level of debt.

Net investment of £56bn in the first 10 months was £3bn more than in the same period last year. This comprised capital expenditure of £87bn (up by £7bn from the same period a year ago) and capital transfers (capital grants, research and development funding, student loan write-offs) of £29bn (down £1bn) less depreciation of £60bn (up £3bn).

Year-end forecast

The OBR’s autumn forecast for the full-year deficit of £138bn (£120bn for the first 10 months, £7bn in February and £11bn in March) is £20bn more than the budget of £118bn (£104bn, £1bn and £13bn respectively). 

As the £112bn deficit reported for the first 10 months in this release is £8bn better than the OBR autumn forecast but £8bn more than budget, the full-year deficit could potentially end up somewhere between £126bn and £130bn on current trends, subject to unexpected costs, the end of year capital spending rush, revisions for incomplete data (especially for local government) and year-end accounting and statistical adjustments.

Borrowing and debt

Table 2 summarises how the government borrowed £62bn in the first 10 months of the financial year to take public-sector net debt to a provisional £2,867bn on 31 January 2026. 

The movement comprised £112bn in public-sector net borrowing (PSNB) to fund the deficit less a £50bn net inflow from working capital movements and government lending.

The ratio of public sector net debt to GDP fell by 0.3 percentage points from 93.2% of GDP at the start of the financial year to 92.9% on 31 January 2026, once 2.8 percentage points of ‘inflating away’ caused by inflation and economic growth adding to GDP (the denominator in the ratio) is taken account of.

Public sector net debt on 31 January 2026 of £2,867bn comprised gross debt of £3,389bn less cash and other liquid financial assets of £522bn.

Public sector net financial liabilities were £2,544bn, being public sector net debt plus other financial liabilities of £726bn less illiquid financial assets of £1,049bn. Reported public sector negative net worth was £676bn, being net financial liabilities less non-financial assets of £1,868bn, although this is understated as it excludes in excess of a trillion pounds in unfunded employee pension obligations.

Revisions

Caution is needed with respect to the numbers published by the ONS, which are repeatedly revised as estimates are refined and gaps in the underlying data are filled. This includes local government where the numbers are only updated in arrears and are based on budget or high-level estimates in the absence of monthly data collection.

This month the ONS revised the deficit for the nine months to December 2025 up by £2bn to £142bn and the reported deficit for the year to 31 March 2025 by £0.5bn to £153bn.

For further information, read the public sector finances release for January 2026.