Official figures show the UK government borrowing rose to £20.2 billion in September – the highest for that month in five years.

The data, released by the Office for National Statistics (ONS), highlights the financial pressure facing the Chancellor as plans for the Budget take shape.

Borrowing (the difference between what the government spends and what it earns through taxes) was £1.6 billion higher than in September last year.

While the government raised more through taxes and National Insurance, this was outweighed by higher spending, particularly on debt interest and inflation-linked costs.

What could this mean for the upcoming budget?

Higher borrowing gives the Chancellor less flexibility when setting out November’s Budget.
In September alone, debt interest costs reached nearly £10 billion, leaving limited scope for tax cuts or new spending.

The Office for Budget Responsibility (OBR) will publish updated forecasts alongside the Budget, showing how much “headroom” the Chancellor has under her fiscal rules. Analysts expect that tax rises may be needed to keep within those limits – potentially raising around £27 billion, with households likely to shoulder much of the burden.

What might be in the budget?

Chancellor Rachel Reeves has said she remains committed to her manifesto pledges not to increase the main rates of Income Tax, VAT, or National Insurance.

She has also promised targeted measures to help with the cost of living. One possible move is a reduction in the 5% VAT rate on energy.

Any new tax increases are likely to be introduced in less direct ways, such as:

• Freezing tax thresholds, which gradually brings more people into higher tax bands.
• Cutting the employee rate of National Insurance, while adding the same amount to income tax. This would have a limited effect on those who are employed, but increase tax collected from pensioners, landlords and the self-employed.
• Reforming property taxes, potentially replacing stamp duty with an ongoing property tax or limiting reliefs for landlords.
• Reducing tax reliefs on ISAs, pension saving, or the size of the tax-free lump sums that can be withdrawn.

Staying prepared, not panicked

In the weeks before a Budget, speculation is inevitable – but the full picture will only become clear when the Chancellor delivers her statement.

Until then, the best approach is to stay informed and continue business as usual.

We’ll share an update after Budget day, highlighting any measures likely to affect you or your business.

If you’d like personalised advice on how potential tax changes could impact your finances, please get in touch with our team.