A 39% surge in stamp duty revenues and an increasing income tax take helped Chancellor George Osborne knock £1 billion off public borrowing in September amid increasing expectations that he will comfortably beat annual deficit targets.
Figures showed the Treasury has borrowed nearly 10% less so far this financial year than in 2012/13 and prompted economists to predict the 2013/14 deficit will undershoot official estimates by up to £15 billion.
They will come as a boost to the Chancellor ahead of further data later this week expected to show continuing improvement in overall economic growth.
The new figures from the Office for National Statistics showed borrowing dropped from £12.1 billion in September 2012 to £11.1 billion for September this year - with the figures stripping out the distorting effect of bank bail-outs.
Martin Beck, of Capital Economics, said: "Although the economic recovery has taken its time to come though in the fiscal numbers, September's figures suggest that the public finances are now beginning to reap the rewards of a stronger economy.
"Meanwhile, the recovery in the housing market is boosting the Government's coffers."
Public finances were boosted by tax receipts up 7% to £44.8 billion, including an increase in stamp duty from £588 million to £817 million. Receipts from income tax were up 11% to £11.3 billion, while VAT and corporation tax takes also rose.
It means the deficit from April to the end of September stands at £56.7 billion, down 9.4% on the same period in the previous financial year.
The independent Office for Budget Responsibility (OBR), set up to monitor the nation's finances, currently expects underlying public sector net borrowing to rise to £119.8 billion for the current financial year.
But a number of economists now say on current trends the annual deficit looks more likely to come in at around £105 billion.
The latest ONS figures showed underlying borrowing for the 2012/13 financial year was slightly lower than previously thought, at £115.4 billion compared to the previous figure of £115.7 million.
However, current net debt excluding bank bail-outs climbed to £1.21 trillion, reaching a new high of 75.9% of the UK's gross domestic product.
The overall debt stands at £2.18 trillion or 136.8% - marginally down in percentage terms on September last year but well below the figures of around 150% during the financial crisis.
Monthly interest payments on the nation's debt fell by 5% but still cost taxpayers £2.8 billion in September - out of total Government expenditure that was up 2.5%, to reach £53.2 billion for the month.
The return of part of the Government's stake in Lloyds Banking Group to private hands was recorded as a £586 billion profit - which will go to paying off debt.
This figure was the difference between the £3.2 billion sale price and the £2.6 billion at which the stock had been valued by the ONS.
The Treasury said the economy was "turning a corner" but Labour claimed that while the fall in monthly borrowing was welcome, the Chancellor looked set to borrow more than planned.
James Knightley of ING Bank said the figures were "fractionally better than expected" and there were hopes for further improvement with the economy growing and the London property boom likely to raise the tax take from stamp duty.
Howard Archer of IHS Global Insight said: "It is looking ever more likely that the Chancellor will significantly undershoot his 2013/14 fiscal targets.
"At the half way stage of fiscal 2013/14, the deficit is clearly below the targeted rate, and it seems likely that improved economic activity will increasing feed through to help the public finances.
"The hope is that the trend in the public finances will increasingly improve over the coming months as improved economic activity increasingly feeds through to boost tax revenues and help limit benefit payments."