British small businesses are investing nearly £5 billion each year in tax and accounting software, according to new research from Monzo, the digital bank serving over 800,000 business customers. As the Making Tax Digital (MTD) for Income Tax deadline approaches in April, the fintech has unveiled a free HMRC-recognised tax tool to simplify compliance for sole traders and landlords.
The upcoming MTD regulations mandate that sole traders and landlords use approved digital platforms to submit quarterly income and expense reports. Despite 70% of sole traders being aware of these changes, more than a quarter (28%) admit they lack confidence in meeting the April deadline. However, 61% believe simpler, integrated tools would ease the tax filing burden.
Monzo's solution, developed in partnership with Sage's embedded services technology, will be fully operational before the April 6 tax year begins. The free tool enables Monzo Business account holders to file tax updates directly through the app, targeting users with straightforward tax needs while acknowledging that growing businesses may still require comprehensive accounting software or professional advisors.
The research highlights significant stress among self-employed individuals, with 52% finding business tax management stressful and 44% admitting to late filings due to complexity. Sole traders dedicate approximately 25 hours annually to tax administration—equivalent to more than three working days that could otherwise support business growth.
Jennifer Staves, Deputy Director of Strategic Design for Making Tax Digital at HMRC, commented: "Making Tax Digital for Income Tax will help people keep clearer records and get their tax right. Using HMRC-recognised software will make it easier for sole traders and landlords to meet the new requirements ahead of April 2026."
Jordan Shwide, General Manager at Monzo Business, stated: "We know many sole traders feel overwhelmed by these changes. By launching a free, HMRC-recognised tax tool in partnership with Sage, we're enabling sole traders to send tax updates directly from their bank account, helping them feel confident and stress-free in April."
Gordon Stuart, SVP of Fintech & Embedded Services at Sage, added: "By embedding trusted tax and compliance tools into everyday banking, we're simplifying tax and reducing friction as Making Tax Digital approaches."
The MTD rollout follows a phased timeline: from April 2026, it applies to those earning over £50,000, dropping to £30,000 in April 2027 and £20,000 in April 2028. The tool is available across all Monzo Business account tiers, both free and paid plans.