Higher tax helped government finance reach record January surplus
BBC World
February 20, 2026
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The UK government achieved a record-breaking £30.4 billion surplus in January, marking the highest monthly surplus since records began in 1993. This significant surplus was driven by higher tax receipts, including capital gains tax, National Insurance contributions, and income tax payments. The jump in capital gains tax revenue, which surged to nearly £17 billion—a 69% increase compared to January 2025—was attributed to investors disposing of assets ahead of an expected tax hike announced in the October 2024 Budget. Additionally, income tax receipts rose by £3.6 billion year-on-year, partly due to frozen tax thresholds that pushed more people into higher tax brackets as their incomes increased.
The surplus was also bolstered by a £2.9 billion increase in National Insurance contributions and £133.3 billion in total tax receipts—a 13.8% rise compared to the previous year. While this positive news comes ahead of the Spring Statement, economists caution that the UK’s public finances remain fragile. Borrowing for the 10 months ending in January dropped by 11.5%, but borrowing is still expected to be among the five highest on record. The government aims to reduce borrowing further by 2030-31, freeing up funds for key services like policing, schools, and healthcare.
Despite the strong start to the year, the UK’s economic outlook remains uncertain. Wage growth has slowed, unemployment is at a five-year high, and economic expansion in 2025 was just 1.3%. Experts warn that much of the retail sales boost in January was temporary, driven by factors like the new year health trend for sports supplements, which may fade. With inflation still above target and a stagnant economy, the government faces pressure to stabilize public finances while addressing long-term economic challenges.
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Originally published on BBC World on 2/20/2026