Monzo adds free in-app tax filing for sole traders

Monzo has launched a free tax filing tool inside its business banking app for sole traders and landlords ahead of Making Tax Digital for Income Tax.

The bank said the tool has HMRC recognition and uses Sage embedded services technology. Monzo said customers with a free Monzo Business account can use it to submit tax updates directly to HMRC from within the app.

Making Tax Digital for Income Tax requires sole traders and landlords to keep digital records and submit quarterly updates of income and expenses using approved software. HMRC plans a phased rollout over several years. From April 2026, the rules apply to sole traders and landlords earning over £50,000. The thresholds fall to £30,000 in April 2027 and £20,000 in April 2028.

Spending levels

Monzo also published research on spending by small businesses on tax and accounting software. It said British small businesses spend nearly GBP £5 billion a year, which it put at GBP £4.8 billion.

The research used a survey of 2,000 small business owners with up to 50 employees. Monzo said it estimated an average spend of GBP £71 per month on tax tools. It combined that figure with UK government estimates of 5.64 million small businesses.

Monzo said the figures point to a large market for digital tax products, as rule changes force more self-employed people to use approved software. HMRC has said millions of sole traders and landlords will move to third-party digital tax tools over the next three years.

Readiness concerns

Monzo's research also looked at awareness and readiness among sole traders. It said 70% of sole traders know about the upcoming update to Making Tax Digital for Income Tax. It said 28% of respondents reported that they were not confident they would be ready for the start of the new regime in April.

The bank said respondents wanted more straightforward tools. It said 61% of sole traders reported that simpler or more integrated tools would make tax filing easier.

Monzo also reported signs of strain around tax administration. It said 52% of sole traders described managing business taxes as stressful. It said 44% had filed late because the process felt too confusing or time consuming.

Monzo said sole traders spend around 25 hours a year on tax administration on average. It framed this as more than three full working days.

Product details

Monzo described its new offering as an in-app option for "straightforward needs". It said the tool will sit alongside broader accounting software and adviser support that many businesses use as they grow.

The bank said the tool will be available on all free and paid Monzo Business account plans. It also said it will be fully available before the new tax year starts on April 6.

HMRC's Making Tax Digital programme aims to shift taxpayers from annual reporting to more frequent digital submissions. The rules require approved software for submitting quarterly updates and end-of-year information.

HMRC linked software choice with readiness for the new requirements.

"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," said Jennifer Staves, Deputy Director, Strategic Design: Making Tax Digital, HMRC.

Monzo said the tool forms part of its approach to business banking for the self-employed. It said it has over 800,000 business customers.

"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, Monzo Business.

"For small businesses, tax can often feel more complicated than it needs to be," said Gordon Stuart, SVP, Fintech & Embedded Services, Sage.

Monzo said its built-in tax tool will be available for the new tax year when Making Tax Digital for Income Tax comes into effect.