UK Government borrowing fell sharply to £11.6 billion in December as a spike in tax receipts and national insurance more than outweighed an uptick in spending, official figures show.

The Office for National Statistics (ONS) said borrowing was £7.1 billion, or 38%, less than the same month in 2024.

The December figure was £1.6 billion lower than the Office for Budget Responsibility (OBR) had forecast, according to new estimates published on Thursday.

It also came in below the £13 billion that most economists had been forecasting.

Nevertheless, the ONS said the December borrowing figure represented the 10th highest for the month since records began in 1993, though not adjusted for inflation.

The figure represents the difference between what the Government spends on the public sector and what it makes from taxes and other income, therefore requiring it to borrow money or creating a surplus of cash.

A significant boost in tax income helped reduce the amount that the Government had to borrow last month.

Central government tax receipts were £7.7 billion, or 8.9%, more than the previous year, largely because of it receiving more income tax, corporation tax and VAT.

An increase to the rate of employer national insurance from April also helped push up the level of contributions.

Meanwhile, total central government spending on public sector services, benefits and debt interest increased by £3.2 billion in December compared with the same month in 2024, according to the ONS’s estimates.

Inflation-linked rises to many benefits and an increase in state pension payments were partly behind the uptick, as well as spending on goods and services because of pay rises and inflation-increased running costs.

On the other hand, grants paid to countries around the world dropped by £1.3 billion, partly reflecting a reduction in payments to the EU.

ONS senior statistician Tom Davies said: “Borrowing in December was substantially down on the same month in 2024, as a result of receipts being up strongly on last year whereas spending is only modestly higher.

“However, across the first nine months of the financial year as a whole, borrowing was fractionally lower than in the same period in 2024.”

Borrowing for the financial year so far, from April to December, totalled £140.4 billion, according to provisional estimates.

This means it dipped by £300 million, or 0.2%, compared with the same nine-month period in 2024.

The OBR said this was £4.1 billion below its current forecast. Lower-than-expected borrowing is a result of spending being less than projected, according to the Government’s official forecaster.

Over the period, both central government tax receipts and total spending grew by 7.6% year on year, according to the estimates.

Chief Secretary to the Treasury James Murray 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.

“We are stabilising the economy, reducing borrowing, rooting out waste in the public sector and making sure that public services deliver value for taxpayers’ money.”

Danni Hewson, head of financial analysis for AJ Bell, said: “The significant fall in government borrowing in December will be a relief for the Treasury, especially since January’s numbers are likely to look even better with a surge in self-assessment receipts expected.

“Frozen tax thresholds coupled with chunky pay rises mean people have been paying more tax, and Rachel Reeves’ changes to employer national insurance also helped total receipts shoot up by £7.7 billion.

“But zoom out to take in the full financial year to date and the picture isn’t quite as rosy, with total borrowing to the end of December at levels only seen twice before.

“With further increases to benefit payments on the way in April, the pressure on the public purse is still uncomfortable.”