UK income tax receipts reach surplus in July

The UK government spent less last month than it received in taxes and other forms of income, official figures have shown.

The Office for National Statistics reported a public finance surplus, excluding banks, of 1.29 billion pounds ($2 billion) in July, nearly exactly as forecast in a Reuters poll.

Britain’s public finances recorded their first July surplus in three years, driven by the strongest tax receipts for the month since records began in 1997. The ONS said income tax receipts of £18.5bn were the strongest for a July since records began in 1997 and compared with £17.6bn a year earlier.

However it is worth noting that his figure is higher than July previous year when it stood at £1.43trillion, or 79.7 per cent of GDP.

“With debt over 80% of GDP the job is not done”, he said in a statement.

Treasury coffers were boosted after seeing the best July for income tax related receipts, generating £18.5billion in revenues.

The performance means the cutting of the deficit is running ahead of schedule.

Analysts at Capital economics said that public finances are benefiting from the strength of the economic recovery.

But if last month’s trend continued, the full-year deficit could undershoot the OBR forecast by around £2 billion.

Public sector debt rose £73.4bn to £1.505 trillion, 80.8% of the UK’s GDP.

“Even so, with eight months of the fiscal year still to go and often large revisions to early borrowing estimates, it is too soon to conclude that the Chancellor is meeting his fiscal plans with room to spare and could therefore reduce the scale of the austerity measures set to hit the economy”.

David Kern, chief economist at the British Chambers of Commerce, said Osborne could beat his deficit target for this year.

Before the recession it was normal for July to regularly post a surplus – averaging £3billion thanks to corporation tax receipts.