Normally I would welcome a better government surplus in January, the one month each year when tax exceeds spending by the government. The Treasury is claiming credit and implying it is doing well on spending. If only. The figures show the surplus is all down to a massive tax hit on the UK economy. Total tax revenue this January was 13.8% higher than January last year, or 10.8% up in real terms after allowing for 3% inflation. VAT receipts were flat because people are so squeezed by the taxes they are not buying so many discretionary items that attract VAT.
The reason I think these numbers should ring alarm bells, not celebratory peals of joy, is they mean less growth, fewer jobs, and a smaller economy next year to try to pay for the ever expanding public sector. Tax on jobs was well up. The results are there to see in rising unemployment and mass unemployment for young people, priced out of the market by high National Insurance and Business rates. Tax on self assessment incomes is well up. Some of that is making more people pay not just last year’s tax but also 50% of their estimate of this year’s on top, so the figures contain a one off of more than one year of tax. Some of it is taxing hard work, extra jobs and savings incomes, which is driving more people to end their small businesses, to emigrate to lower tax countries, or to give up some of their activities. Capital Gains tax is well up. Some of that will be the stream of wealthier people rushing to the exit cashing in their expensive homes and selling stakes in their businesses, so they will be one off profits for the Treasury. Tax on incomes is well up as more and more people get dragged into higher tax bands and need to pay a much higher rate on their pay award.
There is no sign of spending slowing down. The government is rushing to give more away, as with the £35 bn over the longer term to Mauritius for Chagos, the £20 bn a year of unacceptable Bank of England losses on bad bond trading, the continuing surge in sicknotes for life adding greatly to the long term benefits bill, and the ballooning subsidies for renewable energy and the forced electric revolution.
The high tax strategy has delivered a rare good month for the public finances at the cost of more damage to the economy in the months ahead. Next comes more regular tax payments from small businesses, hitting their cashflow. With then higher business rates and lethal National Insurance it means there will be more small businesses closing down and fewer new jobs from this vital sector. The government is still creating and pushing its doomloop. It hates the private sector and thinks it can tax it and tax it again without people leaving and businesses closing. They need to listen to those of us who have seen this from previous Labour governments and do not want them to go the same road to misery and defeat.
February 21, 2026
Indeed a vast transfer of money from the companies and individuals who in general use and invest it well to this government who spend billions doing net harm. Things like net zero, augmenting the feckless, killing private schools, doom loop economics, the wars on small businesses, landlords, the self employed and any growth, non doms, farmers, hard workers…
Unlikely to go well and they will get less going forwards as they strangle the golden geese and kill the tax base!
February 21, 2026
Agreed LL – spend, spend, spend. My first reaction to the figures was: Labour MPs will be immediately thinking how to “invest” (waste) the extra money. I guarantee by the end of this year the extra tax revenue will be spent not used to pay down debt.
February 21, 2026
More waste, waste, waste or often worse do harm, harm, harm!
February 21, 2026
Charles Moore is surely wrong in today’s Telegraph :-
https://www.telegraph.co.uk/news/2026/02/20/west-make-russia-war-unwinnable-need-will-win/
Banging the drum for the corrupt Zelensky regime. We don’t want and cannot afford any more expensive and unnecessary wars.
‘Soft power’ conceit is now replaced by a desire to put a spanner in the works.
February 21, 2026
@Peter.+1. Another way to waste our tax money. £21.8 bn already to Ukraine and another £3bn pa “for as long as it takes”. No wonder super rich Ukranians are to be found flaunting their wealth in Monaco and elsewhere, and have no desire whatsoever for the war to end.
February 21, 2026
CGT is well up as people sell up due to the attacks on landlords or to leave the country. Stamp duty too no doubt but these are one off taxes they will not recur and will kill the tax base going forwards!
February 21, 2026
The very rich have just abandoned houses – a recent report about the Wentworth estate.
February 21, 2026
This government’s wonderful offer to inward investors to the UK.
Come and invest in the UK with IHT 40%, income tax 45%, CGT up to 28%, insurance tax 12%, VAT 20%, NI x 2 total circa 25%, council tax, stamp duty up to 15%, vast reams of red tape, absurd employment laws and rip off net zero fuel costs we will take 90% of your investment off you in no time at all! Then we will waste nearly all of it doing other net harms!
February 21, 2026
A depressing but very useful summary of what is so wrong with the overtax and spend.
In my case, I’m delighted to start drawing the old age pension this year but horrified that it will burn up most of my income tax personal allowance. As a low-earning self employed person I was used to being taxed on about half my earnings. Now I’ll be taxed on the lot, so I won’t be taking on any extra work.
The left never learn. I suppose it is due to most MPs on the left never having had a proper private sector job, or close contacts with self employed people or small businesses.
I also think much of the damage is deliberate, as they have a fabian dislike of the wealth creating classes, from the humble tradesman to the tech billionaire. The “squeeze them” mentality.
Even at the lower end of the earnings scale, we’ve had enough.
February 21, 2026
Indeed. I suppose ex Prince Andrew will be getting his state pension now – starting on his birthday a couple of days back (the day of arrest). Perhaps the £230 PW (less tax) might cheer him up a bit!
February 21, 2026
I too draw my state pension and a modest private pension which is taxed. After my wife passed doing probate i was just under the tax threshold for IHT
Being over 80 that means when I pop my clogs a significant tax bill will be due. To mitigate this I’m buying a new car ( not an EV) and enjoying some good holidays with my friends . If I have to go into care the state will have to pick up the bill
After all it will be cheaper than funding a channel invader.
February 21, 2026
And a massive struggle to even get quotes for work now. Trades people now charging to come to quote, even then if I get one I’m delighted – had to explain this new reality to the Insurance Company.
February 21, 2026
Incidentally, I always pay same day so that I have a chance of the trades coming again when I need them.
February 21, 2026
@Lynn Atkinson. Good for you.
February 21, 2026
Offer to pay cash in hand – that normally interests trades. It is like the massive increase in tobacco duty, this has resulted in me being able, should I so wish, to buy a pack of Manchester brand cigarettes for £6 in a local shop. One consequence of high taxes is that evasion becomes widespread.
Reply This site does not support tax evasion. I campaign for lower and fewer taxes but accept we all have to pay the taxes that government imposes.
February 21, 2026
I was in your position last year, except I had “a little job” which I quite enjoyed but didn’t pay much. I gave the job up and decided to spend my time doing whatever I wanted to do, whenever I wanted to do it. The (small, private company) boss decided not to replace me and now uses existing staff to cover the role I used to perform.
February 21, 2026
That single January figure 13% increase in tax, and the Chancellor’s happy smile as she rushes off to spend spend spend tells anyone everything they need to know about this government.
February 21, 2026
Socialism produces the usual result yet again. Given socialism’s unbroken record of misery and tyranny that it has produced everywhere it has been tried It is hard to understand why socialists still believe it will work next time. No, it won’t. It never has. It never will. They will not listen. The fault always lies in the resistance of the ignorant and in the interference of traitors to the faith. By the ignorant, socialists mean those who have a different philosophy and were thus failed by the state’s education programme. By traitor, socialists mean those who didn’t merely fail to get with the faith, but who actively resist and advocate alternatives. Clearly the citizens of Britain need to be put through a mass re-education programme. Perhaps Starmer has been asking President Xi for advice on how this should be done. Although Starmer released thousands of violent criminals from prison in order to make space for Britain’s first gulag, his programme seems to have stalled. Standby for Chinese Re-Education Academies to be set up in Britain, or mass enrolment in Chinese communist training camps, a spicily eastern and adventurous alternative to the EU’s youth mobility scheme.
February 21, 2026
This is what was voted for. Massive problem as recipients outweigh contributors and more vote themselves more benefits rises. Eventually the system turns in on itself. Probably worth analysing the voting numbers and how close we are to this.
February 21, 2026
All the time labour were out of office they were planning their policies for when they gained power again – trouble is that these policies:
– were all ideological;
– unfair – targeting distinct groups;
– rewarded those on benefits or those working in the state sector;
– punished the private sector;
– increased spending for no return.
They clearly gave little thought to those things that would grow the economy, instead concentrating on destructive doctrines like net-0.
If only they had been able to learn from history, but no, they were intent on turning Britain ever more socialist, implementing the failed policies of Blair, while their devastating handling of the economy has brought nothing but misery.
February 21, 2026
I paid my Income Tax in January, based on the income I received during the previous tax year (2024-2025). I also paid an advance on my anticipated income during the current financial year (2026-2027). Next January, I will be paying less because:
1. I’ve already paid half of it.
2. I gave up my “little job” last May since it was no longer worth doing it post-state retirement age and paying tax on what was little more than the minimum wage (I have other sources of income)
Next January’s tax receipts will be far lower because many people will have made their own decision based on their individual circumstances which will reduce their tax liability. And that will include the great many wealthy/high earning people who have decided to leave the UK rather than pay Labour’s extortionate taxes.
Two-Tier, Theeves and the Treasury Goons seem to be determined to bankrupt the country.
February 21, 2026
Yes, in many ways Fools Gold.
As for “Misety and Defeat” – if I remember correctly it is Labour that gets defeated but us who are miserable… 🙁
February 21, 2026
Governments are at best necessary parasites. More often they’re just parasites. Celebrating more tax is like being told by the doctor, “Good news! Your cancer’s ten per cent bigger. Well done you!”
February 21, 2026
Here’s a (cynical) theory. With this news of government surplus, just ahead of the local elections. Which are predicted to see Labour annihilated.
Reeves and Starmer (sounds like a double act, Morecombe and Wise, Cannon and Ball etc,) will announce some minor easing of taxes on the lower earners. In the hope that we all then forget the disasters they’ve inflicted on us in just under two years.
February 21, 2026
More like Dumb and Dumber…
February 21, 2026
It’s a one off massive tax take. People/ compnies will have altered their behaviour, as we hear in apocryphal stories. People cutting hours, companies not hiring, people moving.
Enjoy the moment Rachel, the arrow has already been launched that will hit you in the eye, and you and TTK launched it yourselves.
February 21, 2026
What we need now is the same surplus every month and in 8 years the national debt will have been paid off.
Don’t worry, it will get easier as interest payments decrease.
February 21, 2026
It is a pretty dismal picture, made worse by Jenrick’s speech that made it clear that not even Reform is serious about facing up to unpleasant truths, like the essential need to abolish the triple lock, abandon the pledge not raise income tax, VAT or NHI, or give the whole tax system the radical reform it so desperately needs.