Tax receipts rose significantly as the UK government recorded much lower borrowing than expected for December 2025. The source of this information was the Office for National Statistics (ONS). The new figures confirm that government borrowing fell to £11.6 billion (0.5 per cent of GDP). This represents a substantial £7.1 billion cut, which is a 38% reduction from the level of borrowing in December 2024 of £8.1 billion. This decrease is due primarily to a big jump in tax revenue. It outstripped every level of government spending over that period.
Yet the ONS recorded a huge spike in tax receipts in December 2025. This was an increase of £7.7 billion compared to last year, representing a whopping 8.9% real terms increase. For the calendar year ending in December, net borrowing reached £140.4 billion. This figure is almost £300 million down compared to the same time period in 2024. Tom Davies, Deputy Director for the ONS public service division, emphasized that the decrease in borrowing resulted from “receipts being up strongly on last year whereas spending is only modestly higher.”
The December borrowing figure isn’t even the highest for that month since 1993 – it’s only the tenth highest. Remember, this number does not account for inflation. This new, improved fiscal situation is a bright spot, and hopefully we’ll see more positive news in January. The biggest increase forecast by economists is in self-assessment tax and capital gains tax receipts.
Ruth Gregory, Deputy Chief UK Economist at Capital Economics, remarked on the recent trends in public finances, stating that they are “finally showing signs of improvement in recent months.” She noted that the January numbers will likely reflect a wave of end-of-year tax receipts. With these measures expected to come from raising income tax thresholds or selling state assets.
The UK government’s moves to re-stabilize an wobbly economy, while cutting down on borrowing, have been praised from all sides. James Murray, a representative of the Treasury, highlighted the government’s commitment to “stabilising the economy, reducing borrowing, rooting out waste in the public sector.” He highlighted that the UK is planning to cut borrowing by more than any other G7 country this financial year. Projections indicate it will hit its lowest point since prior to the pandemic.
The intent of the government is clear given how much they are focused on their fiscal approach. These new numbers give some justification for hoping that public finances are finally turning around. An extraordinary collapse in borrowing is occurring. On the one hand, increased tax revenues might result in increased economic security down the line.