The interest bill: £108.7bn a year just to carry the debt

Every second, the UK government spends about £3,450 on interest. Not on schools, hospitals or the army, and not on paying the debt down: just on the cost of carrying it. In 2025/26 that came to £108.7 billion, and it is rising.

How big is the bill?

The Office for Budget Responsibility, the government's independent forecaster, puts central government debt interest at £108.7 billion in 2025/26, or 3.5% of national income. The IFS puts it at "£1 in every £13" the government spends. Spread across the population, it is roughly £1,590 per person, or about £298 million a day.

Debt interest can be measured in two ways. The Treasury's gross figure for 2025/26 is £96.9 billion. The OBR's figure, used here, is higher because it also counts the cost of the Bank of England's bond holdings (explained below). We say which measure we use each time.

More than the education budget, on the OBR's measure

The Department for Education's budget in 2025/26 was £97.3 billion. Defence was £62.0 billion, transport £29.0 billion and the Home Office £19.6 billion. On the OBR's measure, the government now spends more servicing its debt than the entire Department for Education budget, and about 1¾ times what it spends on defence.

The Resolution Foundation projects that by 2029/30 interest costs will be larger than spending on Universal Credit, Housing Benefit and Child Benefit combined, and that by 2031/32 they will be higher, as a share of GDP, than at any time since 1956/57.

How it got here

In 2019/20 the bill was £39 billion, 1.7% of GDP. It then nearly tripled. In November 2020 the OBR forecast that interest in 2025/26 would be just £29 billion, according to the IFS. The outturn was £109 billion. Three things went wrong at once.

1. Inflation hit the index-linked gilts

About a quarter of the government's gilts are index-linked: the amount owed rises with RPI inflation. The DMO put the share at 25.3% of the gilt portfolio at the end of March 2026. When inflation surged in 2022, the value of those bonds rose with it, and the increase counts as interest. That is why the bill hit £111.6 billion in 2022/23, 4.3% of GDP.

It hasn't gone away. In September 2026 alone the ONS recorded £10.9 billion of debt interest, the highest September on record, of which £4.0 billion came from the inflation uplift on index-linked gilts.

2. Interest rates rose

New borrowing, and old debt as it is refinanced, now costs far more than when rates were near zero. The IFS estimates higher interest rates added £38 billion to the 2025/26 bill compared with 2019/20, about two-thirds of the rise measured as a share of national income. The OBR says the government's average effective interest rate is now around 4%.

3. The Bank of England's bonds became a cost

Under quantitative easing the Bank of England bought gilts with newly created money, paying commercial banks Bank Rate on that money. When Bank Rate was 0.1% this was very profitable, and the Bank sent £123.9 billion of profits to the Treasury. Once rates rose, the scheme started losing money, and the Treasury, which guarantees it, has to cover the losses. It paid £36.3 billion in the year to February 2025 and £16.7 billion in the year to February 2026. The OBR expects further losses of £8.6 billion in 2026/27 and £11.0 billion in 2027/28.

Where it goes next

The OBR's October 2026 forecast, published with the Budget, raised its interest projections. It expects £123.9 billion in 2026/27, £14.5 billion more than it forecast in March, mainly because higher inflation has raised the cost of index-linked gilts. The bill then climbs to £139.0 billion in 2028/29 and £160.0 billion by 2031/32, about 4.2% of GDP.

The bill is also sensitive to markets. The OBR estimates that a one percentage point change in interest rates would raise or lower debt interest by about £16 billion a year in the medium term.

Why it matters

Interest pays for no public services. Every extra pound spent on it is a pound not available for public services, or one more pound that has to be raised in tax or borrowed. And because borrowing adds to the debt, high interest costs can feed on themselves.

The UK is not unusual in having debt. It is unusual in how quickly the cost of that debt has risen: the OBR says UK interest rates have been among the highest in the G7 since 2022. See how the UK compares in Is UK debt high?, and who receives the interest in Who does the UK owe £3 trillion to?

Questions people ask