What is the UK national debt, and who owns it?

UK national debt is approximately £2.7 trillion as of 2025-26, equivalent to around 98 percent of gross domestic product. That is the highest ratio since the early 1960s, outside the immediate post-pandemic spike in 2020-21. The debt is owed by the UK government to whoever holds the bonds, known as gilts, that the government has issued to finance its borrowing. Contrary to common perception, the national debt is not owed to a single foreign creditor. It is held by a diverse range of institutions and individuals, a significant proportion of them domestic.

Who owns the UK national debt?

The single largest holder of UK government debt is the Bank of England, which accumulated approximately £700 to £750 billion of gilts through its quantitative easing programmes between 2009 and 2022. This represents roughly 25 to 28 percent of the total outstanding debt. When the Bank of England holds a gilt, it is effectively the government lending to itself: the interest payments go to the Bank, which remits the profits back to the Treasury. The Bank has been reducing its gilt holdings since 2022 through quantitative tightening.

Overseas investors, including foreign governments, central banks, and institutional investors, hold approximately 25 to 30 percent of outstanding gilts. This is the component that is genuinely owed to external creditors and which creates some dependence on international investor confidence in UK fiscal policy.

UK institutional investors, principally pension funds and insurance companies, hold a substantial share, typically 20 to 25 percent. These institutions buy gilts because their long-dated, predictable cash flows match the structure of their long-term liabilities to policyholders and pension beneficiaries. Individual UK savers hold a smaller but non-trivial amount through NS&I products and retail gilt purchases.

What is the UK deficit?

The national debt is the accumulated stock of all past borrowing that has not yet been repaid. The deficit is the annual flow: the gap between what the government spends each year and what it raises in taxes and other revenues. When the government runs a deficit, it borrows to fill the gap by issuing new gilts, adding to the national debt. When it runs a surplus, it can use the excess to repay existing debt.

The UK has run a deficit in most years since 2002 and in every year since 2008. The OBR projects borrowing of approximately £70 to £90 billion per year through the mid-2020s. At that level of annual borrowing, the national debt continues to grow in absolute terms even if it stabilises or slowly falls as a percentage of GDP as the economy expands. The government's fiscal rules require debt to be falling as a share of GDP over a rolling five-year period, not that the debt itself falls in cash terms.

What does the national debt cost?

The UK spends over £100 billion per year on debt interest, making it one of the largest single items of public expenditure, comparable to the defence budget and significantly more than transport or housing. The cost is sensitive to both the level of debt and the interest rates at which gilts are issued. The sharp rise in gilt yields from 2022 onwards, as the Bank of England raised rates, increased the cost of refinancing maturing debt and issuing new debt, which is one reason the fiscal position has been more constrained than pre-2022 projections anticipated.

What are gilts?

Gilts are UK government bonds. When the government needs to borrow, it issues gilts to investors. Each gilt pays a fixed interest rate (the coupon) and repays the principal at maturity. Gilt yields (the effective return to investors) move inversely to gilt prices: when demand for gilts falls, prices fall and yields rise. Rising gilt yields increase the cost of new government borrowing and can put pressure on the pound. For a fuller explanation of how gilts work, see our note on what UK gilts are. For the quantitative easing programme that made the Bank of England a major gilt holder, see our note on what quantitative easing is.

The Briefed daily briefing covers each OBR forecast, Budget, and debt management announcement. Free, weekdays at 6:45am.