The UK government borrowed £20.2 billion in September 2025, the highest amount for that month in five years. According to data released by the Office for National Statistics (ONS), borrowing rose by £1.6 billion compared to September 2024. This figure is another headache for Chancellor Rachel Reeves, just weeks before she delivers her first full autumn budget on 26 November.
Let’s unpack what these numbers mean, why borrowing is soaring, and what changes might be coming your way.
Table of Contents
Summary
Government borrowing refers to the gap between what the UK government spends and what it earns through taxes and other income. For September 2025, this gap widened due to rising interest costs, higher social spending, and inflation-related expenses. Meanwhile, government income from taxes has gone up, but not enough to offset the growing costs.
Also Read: November 2025 Payment Dates for UK Benefits and Pensions – Full Guide to Financial Support
Here’s a quick overview:
| Category | Amount (Sept 2025) |
|---|---|
| Public sector borrowing | £20.2 billion |
| Debt interest | £9.7 billion |
| Total tax receipts | £86.2 billion |
| Social benefit payments | £27.5 billion |
| Central govt departmental spending | £38.3 billion |
| Support to local authorities | £10.0 billion |
Why Borrowing Is Rising
One of the biggest contributors to the spike in borrowing is the rising cost of servicing debt. Interest payments jumped to £9.7 billion—an increase of £3.8 billion compared to last year. Much of this rise is due to the Retail Prices Index (RPI), which is used to calculate payments on index-linked gilts, a type of government bond.
Public Services and Inflation
Spending by central government departments climbed by £2.6 billion, mainly because of public sector pay increases and inflation. Delivering services like healthcare, education, and policing has become more expensive.
Social Benefits
Social security spending also saw a significant rise. Benefit and pension payments increased by £2 billion, driven by automatic uplifts in line with inflation and wage growth.
Falling Local Government Support
Interestingly, support to local councils dropped by £1.1 billion, but this has no net impact on borrowing because it’s offset by what local authorities receive elsewhere.
Where the Money Came From
While spending has surged, government revenue also increased. In September 2025, tax receipts climbed by £6.8 billion, thanks to recent tax rises on businesses.
Breakdown of increased tax income:
| Tax Type | Increase |
|---|---|
| Social contributions (mainly NICs) | +£3.2 billion |
| Income tax | +£1.3 billion |
| VAT | +£1.0 billion |
| Corporation tax | +£700 million |
These increases reflect policy changes made earlier in the year, including a hike in employers’ National Insurance Contributions.
What This Means for the Autumn Budget
The timing of these figures couldn’t be more critical. With borrowing already at £99.8 billion for the financial year to date—£11.5 billion higher than the same period in 2024—the government has very little fiscal headroom.
Experts predict tax rises and spending cuts are almost certain in the November 26 budget, with an expected total adjustment of £20–30 billion.
Financial experts like Richard Carter from Quilter Cheviot warn that the UK’s ability to invest in growth is being squeezed by debt costs, a complex tax system, and political uncertainty.
What Experts Are Saying
Griffin warns that while Reeves may avoid headline tax hikes, smaller changes to thresholds and allowances could complicate the tax landscape even more, making it harder for average savers and households to plan effectively.
James Murray – Treasury
He insists the government remains committed to reducing borrowing responsibly, adding that the UK is set to deliver the largest primary deficit reduction in the G7 and G20 over the next five years.
Grant Fitzner – ONS
He confirms that this is the highest deficit for the first half of a financial year since the pandemic in 2020. The rise is due to increased spending across the board, even with better tax receipts.
The UK’s fiscal situation is tightening. Despite growth in tax receipts, the rising costs of debt, public services, and social benefits are pushing borrowing to levels not seen since 2020. With a difficult autumn budget ahead, households should prepare for possible tax changes—perhaps not dramatic, but technical and widespread.
Whether it’s higher taxes, squeezed services, or a more complex tax code, change is coming. If you’re not already reviewing your personal finances or business strategy, now is a good time to start.
FAQs
How much did the UK borrow in September 2025?
£20.2 billion, the highest September figure in five years.
What is driving the rise in debt interest?
Index-linked gilts tied to RPI inflation are increasing costs.
Will taxes rise in the autumn budget?
Experts expect tax hikes and spending cuts in November.
How much are social benefit payments now?
They rose to £27.5 billion in September 2025.
When is the autumn budget announcement?
It’s scheduled for November 26, 2025.
