July borrowing came in £2.3bn above the OBR's forecast, tightening the squeeze before the autumn Budget

The government borrowed £1.8bn in July, £0.7bn more than in the same month last year and £2.3bn more than the Office for Budget Responsibility had pencilled in, according to figures published by the Office for National Statistics on Friday.

July is normally one of the kinder months in the fiscal calendar. It is when self-assessment income tax lands, and those receipts duly hit £17.1bn, the highest July total since monthly records began in 1999 and £1.7bn up on a year earlier. Even so, the month still ended in the red.

That combination — record receipts and a deficit anyway — is the clearest signal yet of how much the spending side is absorbing. Borrowing in the first four months of 2026-27 now stands at £56.7bn. That is £6.0bn, or 9.6%, below the same point last year, but £2.3bn above the profile consistent with the OBR's March forecast.

At a glance

• Borrowing was £1.8bn in July 2026, up £0.7bn (68.7%) on July 2025
• That is £2.3bn above the OBR's March 2026 forecast for the month
• Financial year to date borrowing is £56.7bn, down £6.0bn on last year but £2.3bn above forecast
• Public sector net debt reached £2,984.9bn, or 94.1% of GDP, at the end of July
• Self-assessed income tax receipts of £17.1bn were the highest for a July since records began in 1999
• Central government spending rose £5.7bn year on year, outpacing a £4.6bn rise in receipts

What the July figures actually show

Central government receipts totalled £104.3bn in July, £4.6bn more than a year earlier, with the strength concentrated in income tax and National Insurance contributions and in onshore corporation tax. Set against that, central government expenditure came to £110.7bn, an increase of £5.7bn.

The gap between those two lines is the story of the month. Receipts are growing, and growing faster than most forecasters expected at the start of the year, but spending is growing faster still. Debt interest alone accounted for £7.7bn in July, £0.7bn more than in July 2025, a reminder that a large share of the stock of gilts remains sensitive to inflation.

Why a £1.8bn deficit in July matters

In headline terms £1.8bn is a small number against an economy of roughly £3trn. Its significance is in the timing. July is the month when self-assessment payments arrive in bulk, and it has historically been one of the few months capable of producing a surplus. Recording a deficit despite record self-assessment receipts tells you that the underlying monthly run rate is heavier than the annual profile assumes.

The year-to-date overshoot of £2.3bn is small enough to be closed by a couple of stronger months, and the ONS notes that receipts for the year to date are £2.8bn above the forecast profile. The problem sits on the other side of the ledger: central government spending is £5.1bn higher than forecast over the same period.

The debt picture

Public sector net debt stood at £2,984.9bn at the end of July, equivalent to 94.1% of gross domestic product. That ratio is 0.8 percentage points lower than a year earlier, which is the one genuinely encouraging line in the release, but the ONS points out that it remains at levels last seen in the early 1960s.

Debt close to the annual value of national output is not in itself a crisis, and the ratio is falling. It does, however, mean that relatively small movements in gilt yields translate into large absolute changes in the interest bill, which is why £7.7bn of debt interest in a single month draws attention.

A data caveat worth noting

The release also carries a correction. HM Revenue and Customs identified a processing error affecting the VAT receipts data used in the June 2026 public finances release, with VAT receipts for March, April and May 2026 each overestimated by around £235m.

Errors of that size do not change the shape of the fiscal picture, but they do change the baseline against which the current month is judged, and they are a useful corrective to reading any single month's figures too precisely. The public finances data are revised routinely, and early estimates move.

What happens next

The next monthly bulletin, covering August, will show whether July's overshoot was a timing effect or the start of a trend. Between now and then the fiscal debate will be shaped less by the monthly numbers than by the Budget the government has said it will bring forward in the autumn, and by whatever the OBR does to its March forecast when it is next updated.

For now the arithmetic is straightforward. Receipts are running ahead of forecast, spending is running further ahead of forecast, and the difference is being borrowed. Four months into the financial year the gap is £2.3bn. It is the direction of that number over the autumn, not its current size, that will matter.