Digital bank Monzo has unveiled a major new free service designed to help hundreds of thousands of its business customers navigate upcoming tax reforms. The bank is launching an HMRC-recognised tax tool to assist sole traders and landlords with the new Making Tax Digital for Income Tax rules, which begin to take effect from April 2026.
The Tax Burden on Britain's Small Businesses
New research commissioned by Monzo reveals the significant financial and administrative strain tax compliance places on the UK's smallest enterprises. The study found that British small businesses collectively spend close to £5 billion every year on tax and accounting software. On an individual level, sole traders dedicate an average of 25 hours annually to tax administration—the equivalent of more than three full working days.
The emotional toll is equally high. Over half (52%) of sole traders find managing business taxes stressful, and 44% admit to filing their returns late because the process is too confusing or time-consuming. This context makes the impending Making Tax Digital (MTD) changes a source of anxiety for many.
Preparing for the Making Tax Digital Rollout
HMRC's Making Tax Digital for Income Tax initiative will require sole traders and landlords to maintain digital records and submit quarterly updates using approved software. While Monzo's research indicates 70% of sole traders are aware of the changes, more than one in four lack confidence about being ready for the April 2026 deadline.
The rollout will be phased based on income thresholds:
- April 2026: Sole traders and landlords with earnings over £50,000 must comply.
- April 2027: The threshold drops to those earning above £30,000.
- April 2028: It applies to those with income over £20,000.
In total, nearly three million individuals will need to transition to digital tax tools over the next three years.
Monzo's Integrated Solution
To address this challenge, Monzo, which boasts over 800,000 business customers, has partnered with accounting software giant Sage. The resulting tool will be a free, HMRC-recognised tax feature embedded directly into the Monzo app, powered by Sage's technology. It is set to be fully operational before the new tax year begins on 6 April 2026.
The tool will allow anyone with a free Monzo Business account to submit their quarterly tax updates directly to HMRC from within the banking app. This integration aims to provide a straightforward option for basic filing needs, although more complex businesses will still require comprehensive accounting software and professional advice.
Jennifer Staves, deputy director for Making Tax Digital strategic design at HMRC, commented: "Making Tax Digital for Income Tax will help people keep clearer records and get their tax right. Using software which has been recognised and approved by HMRC will make it easier for sole traders and landlords to meet the new requirements."
Jordan Shwide, General Manager at Monzo Business, added: "Making Tax Digital is designed to make tax simpler, but we know many sole traders feel overwhelmed... By launching a free, HMRC-recognised tax tool... we're making it easier for sole traders to send tax updates straight from their bank account, so they can feel stress-free and confident in April."
Gordon Stuart, SVP of fintech and embedded services at Sage, noted: "For small businesses, tax can often feel more complicated than it needs to be. By embedding trusted tax and compliance tools into everyday banking, we're helping simplify tax and reduce friction."
The Monzo tax tool will be available across all free and paid Monzo Business account plans. Sole traders and landlords can find more information on the Monzo Business website. The research for this initiative was conducted by Censuswide in December 2025, surveying 2,000 small business owners.
