UK Reports Record £30.4bn Budget Surplus in January Amid Strong Retail Sales

The UK posted a record £30.4bn budget surplus in January, driven by strong tax revenues and retail sales exceeding forecasts, marking the highest surplus since 1993.

UK retail sales exceed expectations

Recent data reveals that British retail sales experienced a significant increase in January, surpassing forecasts. According to the Office for National Statistics (ONS), retail sales rose by 1.8% month-on-month, well above the predicted 0.2% increase. This represents the largest monthly growth since May 2024.

On an annual basis, retail sales volumes were 4.5% higher than the previous year, again exceeding expectations. The ONS attributes part of the growth in January 2026 to increased sales in artwork and antiques, as well as sustained strong performance from online jewellery retailers.

Despite this strong monthly performance, retail sales over the last three months showed only a marginal increase of 0.1% compared with the previous quarter, influenced by a 0.4% decline in November.

"Retail sales rose slightly in the latest three months, as sales continued to pick up in the new year following a weak November.

Motor fuel sales increased a little across the period, while sales of art works, tech retailers and furniture stores also performed well. These were partially offset by falls in supermarket sales."

— Grant Fitzner, ONS Chief Economist

UK achieves record budget surplus of £30.4bn in January

The UK government recorded a historic budget surplus of £30.4 billion in January, according to the ONS. This figure exceeded expectations of approximately £24 billion and is double the surplus recorded in January of the previous year. It is the highest monthly surplus since records began in 1993.

This surplus is traditionally influenced by self-assessment tax payments, which are due at the end of January. The strong fiscal performance provides a positive outlook for Chancellor Rachel Reeves ahead of the upcoming spring statement.

The public sector (excluding public sector banks) reported a surplus of £30.4 billion in January 2026, which is £15.9 billion more than in January 2025 and marks the highest surplus since monthly records began (not adjusted for inflation).

"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."

— Grant Fitzner, ONS Chief Economist

Introduction: Upcoming public finances and retail sales data

Good morning. Today’s economic updates include new data on the UK’s public finances and retail sales.

Economists anticipated that January would be a strong month for public finances, driven by a surge in self-assessment tax payments before the deadline at the end of the month.

The City expects January’s budget surplus to reach approximately £23.8 billion, reflecting higher tax and income receipts than government spending. This would represent a record surplus for January, offering a positive signal for the Chancellor ahead of the Spring economic forecasts.

Retail spending growth may have slowed in January, with economists predicting a monthly increase of just 0.2%, down from 0.4% in December. However, the annual growth rate could rise to 2.8% from 2.5%.