UK government borrowing fell sharply last month, due to more income from taxes and higher National Insurance Contributions outweighing spending, figures show.
In December government borrowing – the difference between public spending and tax income – was £11.6bn, the Office for National Statistics (ONS) said.
It is down £7.1bn – 38% – from the previous December, and lower than what many economists had predicted, but still higher than that borrowed in the same month in 2023.
Tom Davies, Deputy Director for the ONS public service division, said the fall was a result of “receipts being up strongly on last year whereas spending is only modestly higher”.
Despite the annual fall, the December 2025 figure was the tenth highest for the month since records began in 1993, without adjusting for inflation.
And it remains higher than December 2023, when borrowing stood at £8.1bn.
The figures show the government received £7.7bn more – an 8.9% rise – in taxes in December 2025 than it did in the same month in 2024.
This comprised increases in income tax, corporation tax, VAT and National Insurance contributions (NIC), the ONS said – with changes to the rate of NIC paid by employers coming into effect in April last year.
The ongoing freeze to income tax thresholds means more people are being “dragged” into paying tax, or more tax, as their wages rise – a process known as fiscal drag.
Public spending in December also increased – partly caused by an increase in inflation-linked benefits.
It was provisionally estimated to be £92.9bn – £3.2bn (3.5%) more than in December 2024.
But this rise was more than outweighed by the increase in money collected through taxes and NIC contributions.
According to provisional estimates, borrowing over the financial year to December totalled £140.4bn, about £300m lower than the same period in 2024, the ONS said.
The borrowing figure was estimated as 4.6% of GDP – 0.2 percentage points down from the same period last year.
It was the third-highest level of borrowing over April-December on record, after those in 2020 and 2024.
Chief Secretary to the Treasury, James Murray, said the government was “stabilising the economy, reducing borrowing, rooting out waste in the public sector”.
He said: “Last year we doubled our headroom and we are forecast to cut borrowing more than any other G7 country with borrowing set to be the lowest this year since before the pandemic.”
Shadow chancellor Mel Stride said it was the second year in a row Labour had “presided over record borrowing, outside the pandemic”.
He said debt interest was “at almost double what we spend on defence”, adding: “Only the Conservatives have a credible plan to restore stability to the public finances.”
The Office for Budget Responsibility (OBR) said public borrowing between April and December was £4.1bn (2.8%) below its current forecast.
Its forecast for the last three months of the financial year assumes a 50% rise in capital gains tax (CGT) receipts in January compared to the same month in 2025, due to people disposing of assets to benefit from lower rates ahead of anticipated CGT tax rises in the November Budget.
Ruth Gregory, deputy chief UK economist at Capital Economics, said public finances were “finally showing signs of improvement in recent months”.
“What’s more, a further improvement in January is on the way,” she said, adding a “bumper set” of self-assessment tax and CGT receipts was likely.
But she said the “big picture is that the pace of deficit reduction remains very slow”.
