How much money does the UK government borrow, and does it matter?

Government spending is heavily scrutinised, as people understandably want to know what taxes are being spent on and why. What we do not see as many news headlines about is government borrowing, although it is arguably just as important.

The UK government, and other nations’ governments, have been borrowing funds dating back centuries. When they spend more than they make in taxes, they turn to borrowing money, as well as other solutions such as increasing taxes and spending cuts.

When the government raises taxes, this puts taxpayers and businesses under more financial pressure often leading to job losses and lower business profits. Rather than damaging the economy by increasing taxes, the government will borrow money for projects, such as improving transport infrastructure, which in turn can help boost the economy.

How much does the UK government borrow?

The amount borrowed changes throughout the year. For example, there are times in the year where they do not need to borrow as much because they have received a large amount of tax payments. For example, tax payment deadlines in January boost their funds, so they do not borrow as much.

Over the last full financial year up to March 2025, the borrowing figure stood at £148.3bn. However, the full amount of debt that the government currently has is around £2.9 trillion.1

The financial impact of the Covid pandemic has significantly contributed to the scale of borrowing and it will take time for the economy to recover. One positive to take is that the current borrowing levels are lower than they were throughout the majority of the previous century and also lower than the borrowing of many other leading economies.

How does government borrowing work?

If you are wondering where the government borrows money from, they sell bonds to financial institutions in the UK and abroad, paying interest on the bonds to the institutions in return. With interest rates being much higher than the low rates in place prior to 2021, the interest payments are now more significant.

The interest payments in July 2025 amounted to £7.1bn, which represented an increase of £0.2bn from the previous year. 1

Many experts in the finance sector are concerned about the amount the government is borrowing and the interest that is being accumulated. Spending reviews take place at least every two years, which help determine the government’s budgets.

The government is tasked with striking a balance between trying to keep debt and borrowing to a minimum, while still investing in projects that help to grow the economy to generate more taxes over the long-term.

If borrowing reaches a level that is deemed to be too high, the government is likely to introduce more spending cuts and tax rises. Therefore, to answer the question of whether the government borrowing level matters – yes, it certainly does.

Sources

1. https://www.bbc.co.uk/news/articles/c4g2rky498wo

All the information in this article is correct as of the date of publishing. The opinions expressed in this publication are those of the authors Euxton Mortgage Market. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

September 2025