September 2025 Public Finances
- Thowsif Mukit
- Sep 27
- 3 min read
By September 2025, the UK’s Public Finances remain under close scrutiny. The latest data from the Office for National Statistics (ONS) show that government borrowing has eased slightly compared with the same period last year, but the overall picture is still tight. Public sector net borrowing for August 2025 was around £12 billion, down from the previous year’s £13.5 billion. Total public debt remains above 95 percent of GDP, showing how little room there is for large spending increases or tax cuts ahead of the Autumn Statement.
Debt interest costs have also stayed elevated due to the higher base rate and inflation-linked bond payments. This continues to limit how much flexibility the Treasury has when planning its budgets. As the government approaches its mid-year review, the balance between keeping borrowing under control and supporting the economy remains delicate.
Public Finances
The Public Finances update from the ONS confirms that the government has borrowed less than forecast for the first five months of the 2025–26 financial year. The improvement is largely due to higher tax receipts and moderate spending restraint. Income tax and corporation tax receipts have risen as wages and profits hold steady, but spending on welfare and debt servicing remains heavy.
The Office for Budget Responsibility (OBR) has noted in its September commentary that the outlook for the remainder of the year remains challenging. Even though borrowing is lower than last year, it is still above pre-pandemic levels. The OBR’s latest projections suggest that the Chancellor has only limited fiscal headroom ahead of the Autumn Statement, meaning that significant tax cuts are unlikely. Debt interest costs alone are now absorbing more than eight percent of total government revenues which is a record in modern times.
Meanwhile, the HM Treasury public finances bulletin reiterates that departmental budgets are feeling the squeeze from inflation. Although price pressures have eased from their 2023 highs, the cost of delivering public services has risen faster than planned. The Treasury has urged departments to prioritise productivity and savings to help meet spending targets. Investment continues to focus on infrastructure, green energy, and digital transformation projects that are expected to support longer-term growth.
Taken together, these sources show a mixed fiscal landscape. Borrowing is improving, but debt is high, interest payments are heavy, and economic growth remains subdued. The government’s challenge over the next six months will be maintaining fiscal discipline while finding space for measures that encourage business confidence and investment.
How it impacts you
For households and business owners, the government’s approach to its Public Finances has direct consequences. A cautious stance on borrowing means there is less scope for sweeping tax reliefs or new support schemes in the short term. For individuals, that likely means steady personal tax thresholds and continued pressure on disposable income as inflation and interest rates remain elevated.
For small businesses, tighter public spending can lead to slower payment cycles on government contracts and fewer new projects commissioned through local authorities. However, it also brings a measure of economic stability. Controlling debt helps to prevent sudden policy changes or emergency cuts, allowing firms to plan with more confidence.
Contractors, landlords, and self-employed individuals will also watch the fiscal situation closely. The Chancellor’s decision on whether to prioritise growth incentives or deficit reduction in the Autumn Statement will influence tax planning, investment appetite, and consumer demand for the remainder of the year.
What you can do
Understanding the broader fiscal picture is useful for both short-term decisions and long-term planning. For businesses, now is the right time to review budgets, cashflow forecasts, and investment plans ahead of the Autumn Statement. If borrowing remains restrained, government policy is unlikely to deliver major tax changes before the end of the tax year, which makes this a good moment to strengthen balance sheets and reduce unnecessary costs.
Individuals should continue planning around existing allowances and thresholds. Reviewing pension contributions, ISA savings, and dividend strategies before April 2026 ensures that you are using the current system to its full advantage. For landlords and contractors, it is sensible to keep digital records up to date, as HMRC’s focus on real-time data and compliance continues to grow.
At Ledgr Accountants, we help clients interpret these macroeconomic signals and apply them practically. Whether you are forecasting for your business or managing personal finances, staying informed about the state of the UK’s Public Finances provides the context for smarter, more proactive decisions.
Thowsif Mukit
Commercial Manager
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