New research from Monzo, the digital bank with over 800,000 business customers, reveals British small businesses invest nearly £5 billion (£4.8 bn)* every year in tax and accounting software. With Making Tax Digital (MTD) for Income Tax changes coming in April, Monzo is helping make submitting quarterly updates and the end of year tax return simpler and more accessible for Britain’s smallest businesses by launching a free, HMRC-recognised tax tool.
The new MTD rules will require sole traders and landlords to use approved digital systems to submit quarterly income and expenses updates. While Monzo’s latest research shows 7 in 10 (70%) sole traders are aware of the upcoming MTD update, over 1 in 4 (28%) say they’re not confident they’ll be ready for April. Encouragingly, almost two thirds (61%) say simpler or more integrated tools would make tax filing easier, showing strong desire for solutions that bring banking and tax together in one place.
To help sole traders and landlords prepare with confidence, Monzo is launching a free, HMRC-recognised tax tool, powered by Sage’s embedded services technology, fully available before the new tax year starts on April 6. The tool allows anyone with a free Monzo Business account to submit tax updates directly to HMRC from the Monzo app, offering a simple, in-app filing option for straightforward needs, while many businesses will continue to use broader accounting software and advisor support as their needs grow.
Tax admin can be a source of pressure for self-employed people. 1 in 2 (52%) sole traders say managing business taxes is stressful, and nearly half (44%) admit they’ve filed late because the process felt too confusing or time consuming. On average, sole traders spend around 25 hours a year on tax admin – more than 3 full working days that many would prefer to spend growing their business or enjoying time with loved ones.
Jennifer Staves, Deputy Director, Strategic Design: Making Tax Digital, at HMRC, 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.”
“Making Tax Digital is designed to make tax simpler, but we know many sole traders feel overwhelmed by what these changes mean for them,” said Jordan Shwide, General Manager at Monzo Business. “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.”
“For small businesses, tax can often feel more complicated than it needs to be,” said Gordon Stuart, SVP, Fintech & Embedded Services, Sage. “By embedding trusted tax and compliance tools into everyday banking, we’re helping simplify tax and reduce friction, so people can feel more confident as Making Tax Digital approaches.”
Monzo’s built-in tax tool, powered by Sage, will be available for the new tax year when MTD comes into effect. The tax tool is available to use on all free and paid Monzo Business account plans. Sole traders and landlords can find out more information on the Monzo Business website here.
*Survey responses were grouped into monthly spending ranges, with each range assigned a midpoint to represent typical spend. Using this standard grouped-data method, the estimated average monthly spend on tax tools is £71 per business. This was combined with the UK Government’s Business Population Estimates 2025, which says there are approximately 5.64 million UK small businesses. At an average spend of £71 per month, these 5.64 million businesses collectively spend approximately £4.8 billion per year on tax tools.
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Making Tax Digital (MTD) for Income Tax is an HMRC initiative requiring businesses and self-employed individuals to keep digital records and submit updates using approved software.
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Over the next three years, almost 3 million sole traders and landlords must switch to third-party digital tax tools.
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This is a phased rebuild of the UK tax system. From April 2026, sole traders and landlords earning over £50,000 will fall in scope. Those earning over £30,000 and over £20,000 will need to comply with MTD by April 2027 and April 2028 respectively.
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More information is available on the UK Government’s website here.
Methodology
The research was conducted by Censuswide, among a sample of 2,000 small business owners (up to 50 employees). The data was collected between 15.12.2025 – 23.12.2025. Censuswide abides by and employs members of the Market Research Society and follows the MRS code of conduct and ESOMAR principles. Censuswide is also a member of the British Polling Council.
