With just over a month until HMRC’s Making Tax Digital (MTD) for Income Tax rules come into effect, new research from Monzo Business highlights the administrative burden facing UK sole traders. In response, the digital bank—which currently supports over 800,000 business customers—has introduced a free, built-in tax tool powered by Sage’s embedded accounting technology.
The true cost of tax admin
According to the research, time is precious for Britain’s smallest businesses, yet more than half (54 per cent) of surveyed sole traders spend two hours or more each month on tax admin alone. This adds up to an average of 27 hours a year, which equates to more than three full working days. Based on the UK’s 2026 minimum wage of £12.71 per hour, that time costs the average sole trader around £343 annually.
This administrative heavy lifting is taking its toll on business owners’ wellbeing:
- More than half (52 per cent) of sole traders say managing business taxes and accounting is stressful.
- Nearly half (44 per cent) admit they have submitted a tax filing late because the process felt too confusing or time-consuming.
- While 70 per cent of sole traders are aware of the upcoming MTD rules, 28 per cent are not confident their business will be ready.
- Furthermore, 69 per cent do not currently pay for any digital tools to help with their taxes, despite digital filing becoming a strict new requirement.
Monzo also highlighted the cultural cost of this lost time, noting that the 27 hours spent on tax admin equates to 138 missed tea or coffee breaks a year for the average sole trader.
Making tax digital, simple, and free
To help ease this transition, Monzo Business is rolling out its free, HMRC-recognised tax tool before the new tax year starts on 6 April. Available on all free and paid Monzo Business account plans, the feature helps sole traders stay on top of their finances year-round by categorising transactions, tracking income and expenses in real-time, and making it easier to prepare for tax, all in one place.
Jordan Shwide, general manager at Monzo Business, commented on the launch: “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. 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.”
Navigating the MTD rollout
Making Tax Digital for Income Tax is an HMRC initiative requiring businesses and self-employed individuals to keep digital records and submit updates using approved software. Over the next three years, almost three million sole traders and landlords must switch to third-party digital tax tools.
The phased rebuild of the UK tax system will capture different earning brackets over time:
- April 2026: Sole traders and landlords earning over £50,000 fall into scope.
- April 2027: Those earning over £30,000 will need to comply.
- April 2028: The threshold drops to include those earning over £20,000.
By reducing manual admin and removing the need to juggle spreadsheets or paperwork, Monzo aims to help sole traders feel more confident and better prepared for the MTD rollout.
