Government borrowing for the current financial year has risen to £22.8 billion, despite a small surplus in July following a rise in tax receipts.
The Office for National Statistics (ONS) said public sector net borrowing, excluding public sector banks, increased by £1.9 billion between April and July, compared to the same period in 2016.
That is despite an increase in tax receipts in July, which helped deliver a small surplus of £200 million last month.
Britain's finances tend to enjoy a strong July as self-employed people pay their income tax and businesses settle their corporation tax bills.
Receipts from self-assessed income tax increased by £0.8 billion to £8.0 billion year on year in July, the highest level on record.
The ONS said last month's surplus was the first since July 2002, but experts warned that the news is not so rosy.
"The first July surplus since 2002 is not a signal that the economy is in rude health," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
He said the jump in self-assessment tax receipts last month was down to "unusually low" comparative figures in July 2016, as last year's deadline for payments fell on a weekend and instead bolstered August figures.
The ONS said public sector net debt excluding public sector banks, climbed by £143.9 billion to £1.76 trillion compared with July 2016, the equivalent to 87.5% of gross domestic product (GDP).
Howard Archer said July's figures may still be a "welcome boost" for Chancellor Philip Hammond, who now has a "very decent chance" of undershooting his fiscal target for 2017/2018.
"While a struggling economy and higher interest debt payments look likely to hamper the public finances over the coming months, the Chancellor does look to have a very good chance of having some wiggle room in November's budget.
"Any November wiggle room for the Chancellor will be welcome given that increased public dissatisfaction with austerity and on the public sector pay cap has put pressure on the Government to recalibrate fiscal policy," Mr Archer added.
The ONS said Government borrowing excluding public sector banks decreased by £27 billion to £45.1 billion in the previous financial year to March 2017.
That marks the lowest net borrowing figure since the financial year ending March 2008.
It also managed to undershoot the Office for Budget Responsibility (OBR) forecast of £51.7 billion.
The OBR is expecting a £13.2 billion increase in Government borrowing for the current financial year to £58.3 billion.
Sterling was trading 0.5% lower versus the US dollar at 1.283 in the wake of the data's release, but was flat against the euro at 1.091.