Every year UK taxpayers contribute hundreds of billions of pounds in taxes. But where does all that money actually go?
The latest figures published by the Office for National Statistics (ONS) in February 2026 give a clear picture of how much the UK government collects and where it spends it.
One of the most striking insights is not just how much is spent on public services, but how much is now spent simply paying interest on government debt.
How Much Tax Does the UK Government Collect?
In the 2024/25 tax year, the UK government collected £1.139 trillion in total receipts.
Two taxes dominate government income:
- Income Tax (PAYE and Self Assessment): £310 billion
- National Insurance Contributions: £174 billion
Together, these raised £484 billion, representing around 43% of all government income.
Other sources of government revenue include VAT, corporation tax, fuel duty, business rates and council tax.
These taxes collectively fund public services such as healthcare, education, welfare and defence.
Total UK Government Spending
Government spending, known as Total Managed Expenditure (TME), reached £1.292 trillion in 2024/25.
Because spending exceeded income, the UK government ran a budget deficit of £153 billion.
This deficit is funded through borrowing, which increases the national debt.
Where the Government Spends the Money
The government divides spending across several major categories. The largest are welfare, healthcare and pensions.
UK Government Spending Breakdown (2024/25)
| Category | Spending | Share |
| Welfare (excluding pensions) | £246.1bn | 21.3% |
| Health (NHS) | £241.8bn | 20.9% |
| State Pensions | £137.8bn | 11.9% |
| National Debt Interest | £124.7bn | 10.8% |
| Education | £118.7bn | 10.3% |
| Defence | £63.6bn | 5.5% |
| Public Order & Safety | £51.4bn | 4.4% |
| Transport | £46.4bn | 4.0% |
| Business & Industry | £40.4bn | 3.5% |
| Government Administration | £23.0bn | 2.0% |
| Housing & Utilities | £22.3bn | 1.9% |
| Environment | £17.1bn | 1.5% |
| Culture & Recreation | £14.5bn | 1.3% |
| Overseas Aid | £7.7bn | 0.7% |
| EU Payments | £0.7bn | 0.1% |
The Cost of National Debt
One of the most eye-opening figures in the latest data is how much the UK now spends servicing its debt.
In 2024/25, the government spent £124.7 billion on interest payments alone.
To put that into perspective:
- It is more than the entire defence budget
- It is almost as much as the entire education budget
- It represents over 10% of all government spending
Unlike spending on hospitals, schools or infrastructure, interest payments do not fund any services. They simply cover the cost of borrowing accumulated over previous years.
This means a significant portion of the taxes paid by workers and businesses goes directly towards servicing government debt.
Why Debt Interest Matters for Taxpayers
High debt interest payments can have serious consequences for public finances.
When a large share of government revenue is used to service debt:
- Less money is available for public services
- Governments may need to raise taxes
- Or increase borrowing further
In simple terms, the more a country borrows, the more future tax revenue is consumed just paying interest.
What This Means for Businesses and Individuals
For business owners and taxpayers, these numbers provide useful context when new tax policies are introduced.
Rising spending commitments, particularly in areas like healthcare, pensions and debt interest, place pressure on government finances.
This is one reason governments regularly adjust tax rules, thresholds and reliefs.
How MITLEV Accountants Can Help
Whether you are employed, self-employed or running a company, managing your tax efficiently is more important than ever.
At MITLEV Accountants, we help clients:
- Reduce their tax liabilities legally
- Plan ahead for tax changes
- Structure their businesses tax-efficiently
- Stay compliant with HMRC
If you would like advice on tax planning, self-assessment or business accounting, the team at MITLEV Accountants would be happy to help.
