SAEDNEWS: The UK recorded an unexpected £1.8 billion public-sector borrowing deficit in July 2026, despite record self-assessed income-tax receipts. Rising government spending and higher debt-interest costs are putting further pressure on the country’s finances.
According to SaedNews: The UK government recorded a £1.8 billion budget deficit in July 2026 despite strong tax revenues, highlighting continued pressure from rising public spending. The Office for National Statistics (ONS) said net public-sector borrowing reached £1.8 billion, contrary to economists’ expectations of a balanced budget.
The Office for Budget Responsibility (OBR) had previously forecast a £500 million surplus for July, which would have been the first surplus for that month since before the Covid-19 pandemic.
Higher government spending was the main reason for the shortfall. Central government spending on social benefits increased by £2 billion from a year earlier, while spending on goods and services, including government staff costs, rose by another £1.2 billion.
Self-assessed income-tax receipts reached a record level in July, but the increase was not enough to offset the rise in spending. Meanwhile, the June borrowing figure was revised down from £16 billion to £12.8 billion.
Despite that revision, public finances remained weaker than forecast during the first four months of fiscal year 2026-27. Public-sector borrowing from April through July reached £56.7 billion, compared with the OBR’s £54.4 billion forecast, leaving borrowing £2.3 billion above the official estimate.
Thomas Pugh, an economist at tax and audit firm RSM, said government borrowing was likely to remain above OBR projections later in the year as spending continued to climb.
He said higher government bond yields, persistent inflation and increased public expenditure could keep borrowing above 4% of gross domestic product this year, compared with the official forecast of 3.6%.
The UK’s current budget deficit, which measures day-to-day government spending against tax revenues, stood at £34.7 billion between April and July. That was slightly better than the OBR’s £36.7 billion forecast. Under the government’s current fiscal rules, this part of the budget is required to return to balance by fiscal year 2029-30.
New UK Finance Minister John Healey also stressed the importance of fiscal discipline, saying the government was committed to following its fiscal rules and maintaining a financial buffer against global instability.
His comments came as the government prepares its autumn budget, leaving less fiscal room for higher spending or broad support measures.
Government debt-interest payments were also £700 million higher in July than a year earlier. An ONS statistician warned that the cost could rise significantly in September, linked to inflation trends and the timing of government bond interest payments.
The figures were released as UK inflation rose to 2.9% in July from 2.6% in June, with the increase driven mainly by higher household energy costs.
