Monzo launches free HMRC-recognised tax tool for sole traders

January 19, 2026

Monzo, the digital bank with more than 800,000 business customers, has published new research highlighting the scale of tax and accounting costs for British small businesses while unveiling a new free tax tool designed to support upcoming Making Tax Digital changes.

According to Monzo’s findings, UK small businesses collectively invest close to £5bn (£4.8bn) each year in tax and accounting software.

The research comes as Making Tax Digital (MTD) for Income Tax requirements approach, with changes due to take effect in April, requiring more frequent and digitally enabled tax submissions.

Under the new MTD rules, sole traders and landlords will need to use approved digital systems to submit quarterly income and expense updates to HMRC. While awareness of the changes is relatively high, with 7 in 10 sole traders familiar with the upcoming requirements, more than a quarter said they do not feel confident they will be ready in time.

At the same time, nearly two thirds indicated that simpler or more integrated tools would make tax filing easier, underlining demand for solutions that combine banking and tax management.

To address this, Monzo is launching a free, HMRC-recognised tax tool, powered by embedded services technology from Sage. The tool will be fully available before the new tax year begins on 6 April and will allow users with a free Monzo Business account to submit tax updates directly to HMRC from within the Monzo app. The offering is designed for straightforward tax needs, while businesses with more complex requirements may continue to rely on broader accounting software and professional advisers.

The research also highlights the pressure tax administration places on self-employed people. More than half of sole traders said managing business taxes is stressful, and nearly half admitted to filing late due to the process being confusing or time consuming. On average, sole traders spend around 25 hours a year on tax administration, equivalent to more than three full working days.

HMRC Deputy Director for Strategic Design for Making Tax Digital Jennifer Staves said, “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 and be ready ahead of April 2026.”

Monzo Business general manager Jordan Shwide said, “Making Tax Digital is designed to make tax simpler, but we know many sole traders feel overwhelmed by what these changes mean for them. By launching a free, HMRC-recognised tax tool, in partnership with Sage, 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.”