Personal Money · Thursday, 24 September 2026
Britain paid 8.8bn pounds in interest on its debt in August, a record for the month. The Budget is on 28 October.
Britain's government borrowed 18.3bn pounds in August, and a quarter of what it owes grows with prices. The chancellor has five weeks to find the money, with income tax, VAT and national insurance ruled out.
18.3bn pounds
borrowed by the UK government in August 2026
the gap between its spending and the tax it collected, almost a fifth wider than a year before
8.8bn pounds
paid in interest on UK government debt in August
the most for any August since records began in 1997
12,000 pounds
the yearly cash ISA limit for under-65s from April 2027
cut from 20,000 pounds at the November 2025 Budget
The lead story — what happened
-
Britain's government borrowed 18.3bn pounds in August, almost a fifth more than in August 2025, the Office for National Statistics said.
[1] -
Borrowing is the gap between the tax the UK government collects and what it spends.
[1] The gap was 2.9bn pounds wider than a year earlier.[2] -
Interest on the UK government's debt reached 8.8bn pounds in the month, the highest for any August since records began in 1997.
[1] -
Prices rose at their fastest rate in five months in August, pushed up by petrol and diesel.
[1] Spending on public services and benefits grew faster than tax receipts as a result.[1] -
About a quarter of the UK's government debt is linked to inflation.
[1] Martin Beck, chief economist at WPI Strategy, said the interest on it is likely to rise in the coming months.[1] -
The Institute for Fiscal Studies, a research group, called debt interest a worryingly large share of government spending.
[1] -
John Healey, the chancellor in charge of tax and spending, gives his first Budget on 28 October.
[1] [3] -
Labour's 2024 manifesto ruled out raising income tax, VAT or national insurance.
[3] Capital Economics, a research firm, said the figures make it likelier that plans by Andy Burnham, Britain's prime minister, are cut back or delayed.[1] -
The last Budget, in November 2025, already froze the income tax and national insurance thresholds until April 2031.
[5] -
From 6 April 2027, people under 65 can put only 12,000 pounds a year into a cash ISA, a tax-free savings account, down from 20,000 pounds.
[6] Healey could keep that cut, reverse it, or cap how much anyone may hold in ISAs over a lifetime.[4] -
More than 5,000 people hold over a million pounds in ISAs, according to the UK tax authority.
[4] Tax on savings interest outside an ISA rises by two points, to 22% and 42%, from the 2027-28 tax year.[7] -
Tom Selby of AJ Bell, an investment firm, said the chancellor needs to settle the future of the triple lock, the state pension promise that costs 10bn pounds a year.
[3]
- Debt tied to inflation25 · 25%
- Other government debt75 · 75%
Who is involved
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John Healey
Britain's chancellor, in charge of tax and spending; he gives his first Budget on 28 October
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Andy Burnham
Britain's prime minister since 20 July; his spending plans now face less room
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The Office for National Statistics
the UK's official statistics body; it published the August borrowing figures
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The Institute for Fiscal Studies
a UK research group on tax and spending; it warned that debt interest has grown since the last forecast
How it unfolded
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Nov 2025 Rachel Reeves's Budget freezes tax thresholds to 2031 and cuts the cash ISA limit from 2027
[5] [6] -
20 July 2026 Andy Burnham becomes prime minister, with John Healey as chancellor
[3] -
Tuesday Official figures show 18.3bn pounds borrowed in August
[2] -
28 October Healey's first Budget
[1] -
6 April 2027 The cash ISA limit for under-65s falls to 12,000 pounds
[6]
Where this points
The next test is the 28 October Budget: whether Healey raises a tax the manifesto did not rule out, such as tax on savings or property, or changes the cash ISA cut.
What is pushing on the whole day
The bar and the word are our reading of how hard each one is pushing today. The arrow is where it is heading. The evidence is in the stories below.
Petrol and diesel pushed UK inflation to a five-month high in August.
Britain paid a record 8.8bn pounds in August interest on its debt.
India's government and banks carried the cost of UPI, its free phone payment system, until now.
The rest of the day
5 more stories on this beat.
Each with its own sources. None of these is a link to the story above.
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02
India's free phone payments get a fee
The National Payments Corporation of India, which runs UPI, said this month that shops will pay a 0.4% fee on some UPI payments above 2,000 rupees, about 21 dollars, from 15 October.
[8] UPI, launched in 2016, lets people pay by phone, and more than 550 million use it.[9] Payments between people stay free, and so do shop payments up to 2,000 rupees.[8] India's government says about 96% of shop payments are unaffected.[8] Shops may not pass the fee on to customers, and it is capped at 300 rupees a payment.[8] 4 of 100
of every 100 payments to shops, about 4 pay the fee
India's government says about 96 in every 100 payments to shops stay free. The dots show the 4 that do not. Why it matters — Until now India's government, banks and payment firms paid to run UPI, and this moves part of that cost onto shopkeepers.
[8] Some warn that shops may ask for cash on larger sales instead.[8] -
03
UK gas hits its highest price since 2022
Europe's benchmark gas price passed 75 euros a megawatt-hour this month, its highest since late 2022, and UK gas passed 185p a therm.
[14] The Strait of Hormuz, which carries about a fifth of the world's oil and liquefied gas, has been effectively closed for about six months.[14] Capital Economics, a research firm, does not expect it to start reopening before early 2027.[14] Centrica's boss says the UK has almost no gas in storage for winter.[14] Why it matters — Wholesale gas prices feed into Ofgem's cap on household energy bills, which rises 4% in October to 1,723 pounds a year for a typical home.
[14] Cornwall Insight, an energy consultancy, said the spike puts pressure on its forecast of a further 9% rise in January.[14] -
04
US mortgage rates dip, still above 7%
The average 30-year fixed US mortgage rate fell to 7.04% on 23 September, 0.12 points lower than the day before, according to rates from Zillow.
[10] It was 7.05% on 18 September.[11] Mortgage rates follow the yield on the US government's ten-year bonds, which fell as hopes grew that the Strait of Hormuz could reopen and oil prices dropped.[10] [11] The US central bank raised its main rate by a quarter point at its September meeting and signalled more rises may follow.[10] Why it matters — A home loan in the US is priced off what investors demand to lend to the US government for ten years, so a war that pushes up oil moves the cost of a house.
[11] Buyers taking a new fixed loan now carry that rate for as long as 30 years.[10] -
05
Americans pay 107bn dollars more for fuel
US consumers have spent about 107bn dollars more on petrol and diesel than they would have without the wars in Iran and Ukraine, according to estimates by Brown University's Climate Solutions Lab.
[12] That averages more than 500 million dollars a day since the US and Israel attacked Iran on 28 February.[12] The estimate counts the effect of both conflicts on fuel supply together.[12] Oil prices returning above 100 dollars a barrel mean the total will keep growing.[12] Why it matters — Fuel is a cost almost every household pays weekly, so the war reaches people who never follow news from the Gulf.
[12] Dearer petrol and diesel also pushed up prices in Britain in August.[1] -
06
A simpler US student aid form by 1 October
The US form students fill in to apply for federal college aid, the FAFSA, is being tested for the 2027-28 school year and should open to everyone by 1 October.
[13] Three years ago a new version broke down and delayed aid for many families.[13] Officials and testers, including students at KIPP DC, a group of schools in Washington, say the new form is quicker and gives an aid estimate sooner.[13] It arrives as new limits on federal loans take effect.[13] Why it matters — Since 1 July 2026, new graduate students can no longer take out Grad PLUS loans, and face a 100,000-dollar total limit on federal loans, or 200,000 dollars on some professional courses.
[15] So the aid estimate the form gives now matters more to how much a family must find elsewhere.[13]
When prices rise, a debt tied to prices grows by itself
Britain wrote a quarter of its debt to follow inflation, so dearer petrol in August raised its interest bill before any minister made a choice.
The twist
A payment tied to prices is agreed once, when the rule is written. After that it grows every time prices do, and nobody has to agree to it again.
The picture
How it works
- A debt or a bill is written to follow a price index
- Prices rise, as petrol and diesel did in August
- The amount owed grows with the index, with no new decision
- Britain paid 8.8bn pounds in interest in August, a record for the month
- That money is spent before any Budget choice is made
The same force, elsewhere today
Where this chain is also running, in today's other stories.
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India's fee on UPI payments
The fee is written as 0.4% of the payment, so a bigger bill carries a bigger fee with no new decision, until the 300-rupee cap.
-
UK gas and the January energy cap
Ofgem works the cap out from wholesale gas prices, so the gas spike put pressure on the January forecast before anyone set a new bill.
-
US mortgage rates
Lenders price home loans off the ten-year government bond yield, so when oil fell and yields followed, the rate fell too.
Where you've seen this
US Social Security
payments rise each January by a price index measured the summer before
Rent contracts
some leases raise the rent each year by the inflation rate
Wage deals
some union contracts lift pay automatically when prices rise
The catch
It works both ways: when prices fall, a payment tied to them falls too. A cap can stop it: India's UPI fee never goes above 300 rupees, however big the payment.
And the whole of it
A taxpayer in Britain, a shopkeeper in India and a family taking a mortgage in the US all saw a number move this month. None of them chose it. The rules that moved it were written years earlier.
What is really going on
Britain's government paid 8.8bn pounds in interest in August, a record for the month, and part of the rise came from debt that grows with prices, which petrol and diesel pushed up.
Why it works on us — One monthly figure with a record attached reads like a crisis, while one economist quoted beside it warned against reading too much into a single month.
Who gains
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Holders of UK inflation-linked government bonds
— The interest they receive rises with prices, which is why the UK government's interest bill rose in August.
[1] -
Banks and payment firms in India
— The new UPI fee is shared among the firms that process the payments, not kept by India's government.
[8] -
Savers aged over 65 in Britain
— They keep the full 20,000-pound cash ISA limit when it falls for everyone younger in April 2027.
[6] -
US students applying for aid for 2027-28
— The new form is quicker and gives an estimate of their aid sooner, testers say.
[13]
Who pays
-
UK taxpayers and public services
— 8.8bn pounds went on debt interest in one month, money the UK government cannot spend on anything else.
[1] -
Indian shopkeepers taking larger payments
— They pay 0.4% on qualifying payments above 2,000 rupees and are not allowed to charge it to customers.
[8] -
US drivers
— They have paid about 107bn dollars more for fuel since February, more than 500 million dollars a day.
[12] -
UK households this winter
— The energy cap rises 4% in October, and a gas spike puts pressure on a forecast 9% rise in January.
[14] -
New US graduate students
— Since 1 July they cannot take Grad PLUS loans, so any cost above the federal limit must come from elsewhere.
[15]
What nobody knows yet
Open questions from across today’s stories — ours included.
-
01
Which taxes the 28 October Budget raises, if any.
The 2024 manifesto rules out raising the three biggest taxes, and Capital Economics expects plans to be cut back to avoid big tax rises. Nothing is settled until Healey speaks.
[3] [1] -
02
How many more pounds the UK will pay on its inflation-linked debt.
It depends on how fast prices rise over the coming months, which depends in turn on oil and the war with Iran.
[1] -
03
Whether Healey keeps the cut to the cash ISA limit.
Morningstar lists keeping it, reversing it and a lifetime cap as options, and the UK government has said nothing.
[4] -
04
Whether Indian shops refuse UPI for payments above 2,000 rupees.
Shops may not pass the fee on, and some warn they will ask for cash instead; nobody can know until the fee starts on 15 October.
[8] -
05
When the Strait of Hormuz reopens.
Capital Economics expects it no sooner than early 2027, and an Oxford Economics economist said a cold or mild winter could matter as much for gas bills.
[14] -
06
Where US mortgage rates settle.
They fell on hopes about Hormuz on 23 September, but the US central bank has signalled it may raise its rate again.
[10] -
07
How much of the extra 107bn dollars on fuel is due to the Iran war alone.
Brown University's estimate counts the Iran war and the Russia-Ukraine disruption together.
[12] -
08
Whether the new US student aid form works for everyone on 1 October.
So far it has been tested by small groups, and a previous version broke down three years ago.
[13]
In India, payments between people over UPI stay free, and India's government says about 96 in every 100 payments to shops will not carry the new fee.
Also true today
- The US student aid form for 2027-28 is quicker to fill in than before and tells students sooner how much aid they may get, according to officials and students who tested it.
- The average 30-year US mortgage rate fell 0.12 points in a day on 23 September, to 7.04%, as oil prices eased.
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