The level of new public sector borrowing in July was £3.8bn, according to the Office for National Statistics (ONS).
It is well down on the £6.1bn borrowed in July last year and brings the total so far this financial year to £44.9bn, below last year's £47.5bn.
The figure, which highlights the gap between tax receipts and spending, shows some signs of economic recovery.
The tax take rose by 10.5% to £49.7bn, the best July since 2008.
The figures were well received by economists.
Andrew Goodwin, advisor to the Ernst & Young ITEM Club, which uses the goverment's own model to forecast the economy, called the figures "encouraging".
He said they indicated that the jump in tax income showed the recovery was growing in strength: "Given that we are still in the early stages of the recovery, the size of the bounce demonstrates how resilient company finances have been during the recession."
July's figures are usually boosted by corporation tax and VAT receipts, although the recession forced the UK to borrow during the month for the first time in 13 years in 2009.
Mr Goodwin warned the chancellor still faced a "mammoth task".
The forecast for borrowing for 2010-11 is £149bn, down from the £155bn borrowed in 2009-10.
The ONS figures exclude the impact of financial interventions by the government, which reduce overall borrowing because of profit contributions from the part-nationalised banks.