UK households are saving more as threat of tax increases and higher inflation grows
The latest Money and Credit statistics published by the Bank of England show that British households have been topping up their savings considerably as the threat of tax increases and higher inflation grows.
Households’ deposits with banks and building societies increased by £7.8 billion in June from May and were mainly driven by £3.6 billion being ploughed into ISAs.
“While credit borrowing is on the up, the increase in household deposits suggests more people are finding themselves with a little more cash to spare,” said Ian Futcher (Financial Planner at Quilter).
“While it could be a sign that people are topping up their savings as much as possible, given inflation is expected to rise further later in the year, it is encouraging to see more people being able to pre-emptively put money aside for a rainy day.”
Gloomy economic figures have heaped more pressure on the government and its promise to improve growth. And if that wasn’t enough, there have also been some stark warnings about public finances and the country’s ability to service its debts.
The UK’s Public sector net borrowing came in at £20.7 billion in June 2025, £6.6 billion more than was recorded in June last year and the second highest June borrowing since records began, surpassed only during the pandemic.
More importantly, the borrowing figure is £3.5 billion more than the Office for Budget Responsibility forecast for the month. The increase in public spending was largely because of a significant increase in debt interest payments.
All of this has led to a growing expectation that Chancellor Rachel Reeves will have to introduce some significant tax hikes later this year, or reduce government spending.
Reeves sought to assure voters that £40 billion in tax hikes in October 2024 rises were enough to plug an inherited “black hole”. But she is already struggling to preserve those projections, after a politically painful retreat from welfare changes designed to save £5 billion.
Hopes that a faster-growing economy would narrow the deficit, by boosting tax receipts and reducing spending requirements, have not been fulfilled.
