Public sector net borrowing stripping out the distorting effects of bank bailouts fell to £13.2 billion in the month from £14.4 billion a year earlier - broadly in line with economists’ expectations.
And the Office for National Statistics (ONS) also revised underlying borrowing for the 2012/13 financial year lower to £115.7 billion, down from an earlier estimate of £116.5 billion.
The independent Office for Budget Responsibility (OBR), set up to monitor the state’s finances, expects underlying public sector net borrowing to rise in the latest financial year to about £120 billion.
The deficit in August was nursed lower by a £1.2 billion drop in central government borrowing to £12.7 billion.
Local government borrowing edged up by around £200 million to £1.1 billion.
Corporation tax receipts were slightly higher at £1.3 billion, but income tax receipts fell to £10.5 billion from £11.1 billion.
A Treasury spokeswoman said: “Borrowing is down this month and revisions show that borrowing this year and last year was lower than previously thought.
“The economy is turning a corner, but there is a long way to go and the Government is sticking to the economic plan that has already cut the deficit by a third and enabled the private sector to create over 1.4 million new jobs.”
Economists said the figures may show the improving economy is starting to filter through to reduce the state’s borrowing needs. Martin Beck, UK economist at consultancy Capital Economics, said public finances could improve at a faster rate than the OBR predicts.
He said: “August’s public finances data suggests that the economic recovery could be finally starting to make its presence felt in the fiscal numbers.
“More good news is a downward revision to borrowing in 2012/13.”
The economy expanded by 0.7% in the April to June quarter and the Bank of England recently revealed it expects growth of the same amount in the third quarter, as Britain’s economic recovery picks up. Unlike previous months, the August borrowing figures were not distorted by multibillion-pound transfers of quantitative easing cash or Royal Mail pension assets.
July’s data released last month contained a surprise rise in borrowing - compared with a normal surplus - and the revised figures showed this deteriorated further to underlying borrowing of £688 million.
The ONS said VAT sales tax receipts edged up to £9.2 billion from £9 billion in August, while there was also a pick-up in stamp duty receipts from home sales, but added there were no other discernible effects on the tax coffers from the improving economy.
Howard Archer, IHS Global Insight chief UK and European economist, said the figures put the Government “well on track” to beat its fiscal targets, but cautioned there is likely to be a “lagged impact” before the improving economy fully feeds through to lift tax revenues.
He said: “The recent improved economic performance means that pressure on Chancellor George Osborne to relax the fiscal squeeze to help the economy has fallen away.’’