Monzo launches free in-app tax tool for sole traders

Monzo Business has introduced a free in-app tax tool for sole traders and landlords ahead of the next phase of HMRC's Making Tax Digital (MTD) rules for Income Tax. The changes will require taxpayers in scope to use approved software to submit quarterly updates of income and expenses.

Monzo has more than 800,000 business customers. The new feature, built using Sage embedded accounting technology, sits inside Monzo's business banking app.

Research published alongside the launch found that 69% of surveyed sole traders do not pay for digital tax tools, despite digital filing becoming a requirement for those in scope of MTD.

MTD shift

MTD for Income Tax will bring more frequent reporting for some self-employed people and landlords. Taxpayers in scope must keep digital records and submit updates through HMRC-recognised software.

The change will arrive in phases over the next three years. From April 2026, sole traders and landlords earning more than £50,000 will be in scope. The threshold then falls to more than £30,000 from April 2027, and more than £20,000 from April 2028.

Against that backdrop, the survey found that 70% of sole traders said they were aware of MTD. However, 28% said they were not confident their business would be ready.

Time burden

The research also highlighted the time spent on tax administration. Respondents said they spend an average of 27 hours a year on tax admin, which Monzo described as more than three full working days.

More than half (54%) said they spend two hours or more each month on tax administration. Monzo put the time cost at about £343 a year, based on the 2026 UK minimum wage of £12.71 per hour for workers aged 21 and over.

The survey also linked the time burden to working patterns and breaks. It found that 88% of respondents take a hot drink break during the workday, with an average break lasting 11.7 minutes. On that basis, Monzo estimated that 27 hours a year spent on tax administration equate to 138 missed drink breaks.

Asked about preferred hot drinks, 77% said coffee was their regular choice. Black tea followed at 44%, and hot chocolate at 43%.

Product detail

The tax tool is designed to work alongside existing Monzo Business features, including transaction categorisation and income and expense tracking. Monzo said the tool is HMRC-recognised and will be available on both free and paid Monzo Business plans.

The feature is due to be fully available before the start of the new tax year on April 6.

Monzo positioned the tool as a way for sole traders to manage tax administration inside their banking app, rather than using separate spreadsheets or paperwork.

Jordan Shwide, General Manager of Monzo Business, said the approaching rule changes risk adding to pressures already felt by sole traders.

"Sole traders already work incredibly hard, often at the expense of their own time and wellbeing. With Making Tax Digital coming soon, we want to make sure people feel supported - not overwhelmed," said Shwide.

He said building the tool into the app could save time.

"By building a simple tax tool directly into everyday business banking, we're helping sole traders save hours of admin each month. That means less stress, fewer late nights, and maybe even time for an extra coffee break or two," he said.

The survey also suggested stress and late filings remain common. It found that 52% said managing business taxes and accounting is stressful, while 44% said they had submitted a tax filing late because the process felt too confusing or time-consuming.

The wider MTD programme is expected to affect almost 3 million sole traders and landlords over the next three years as thresholds reduce and more taxpayers come into scope.