Rachel Reeves has been handed a fiscal boost before next month’s spring statement after record self-assessment and capital gains tax receipts yielded the largest budget surplus since records began more than three decades ago.

The Office for National Statistics (ONS) said on Friday that public revenues were £30.4 billion higher than public spending in January, the largest budget surplus since records began in 1993.

The surplus was much larger than the £23.8 billion forecast by City analysts. January is typically a strong month for tax receipts because people file their self-assessment tax returns. The budget surplus in January 2025 was £14.5 billion.

The record surplus was driven by a sharp fall in the amount of money the government paid to investors who hold its debt. Debt interest spending slid to £1.5 billion in January from £9.1 billion in the previous month.

On the revenue side, income jumped by nearly 14 per cent over the past year to £133.3 billion in January, mainly driven by a £12.3 billion increase in income tax revenues and a £2.9 billion rise in national insurance contributions after businesses were subjected to higher payroll levies last spring. January’s combined self-assessment and capital gains tax income both hit record highs.

Grant Fitzner, chief economist at the ONS, said: “January, which is traditionally a strong month for self-assessed tax receipts, saw the highest surplus since monthly records began.

“Revenue was strongly up on the same time last year, while spending was little changed, due to lower debt interest payments largely offsetting higher costs on public services and benefits. Across the first ten months of the current financial year, borrowing is lower than the same period a year ago.”

Ian King speaking to Times Radio

Compared with forecasts from the Office for Budget Responsibility published at the November budget, the government has put the public finances on a stronger footing than the watchdog expected by this point in the fiscal year.

The OBR projected that in the ten months to January the government would have borrowed £120.4 billion but, in reality, it borrowed £112.1 billion, down by 11.5 per cent compared with the same period last year.

The budget watchdog, which is still without a head after its former chief Richard Hughes stepped down last year, will release new economic forecasts on March 3 as part of the spring statement. Rachel Reeves, the chancellor, is not expected to announce tax rises or spending cuts.

Several government U-turns, including softening a rise in business rates for pubs and an inheritance tax increase on farms and some businesses, have partially eroded the chancellor’s £22 billion of fiscal headroom. However, a sharp fall in government borrowing costs may have offset these policy changes.

Dennis Tatarkov, senior economist at KPMG UK, said: “The chancellor’s headroom has already likely diminished by £3 billion in the three months that have passed since the budget. Weaker than expected growth in the second half of 2025 has shaved off an estimated £6 billion from the nearly £22 billion of buffer, partially compensated by lower interest rates.”

James Murray, chief secretary to the Treasury, said the government had “the right plan to build a stronger, more secure economy” and that “we are making sure that taxpayers’ money is spent wisely and borrowing this year is forecast to be the lowest since before the pandemic”.