4 ways Making Tax Digital can make life easier
This article was created in partnership with Sage.
Making Tax Digital for Income Tax (MTD) is coming in April 2026. And with it more admin and more hassle, right? Not quite.
If you're a sole trader or landlord who'll be affected by HMRC’s new rules, yes you need to follow them but you can set your own too. You get to choose your software and get to grips with your finances, taking some of the stress out of tax season.
Before we get into it, a reminder that we can’t give you tax or financial advice. You’ll need to speak to a professional adviser for that.
Let’s recap: What is Making Tax Digital for Income Tax?
MTD is HMRC's new rules for filing income tax — digitally.
That means keeping digital records and using HMRC-recognised software to submit quarterly updates and your end of year tax return.
Sounds like extra work? Stick with us. The software will automate most of this for you, so all you need to do is check the numbers add up and submit.
It’s launching in phases from April 2026, based on how much you earn. People who earned over £50,000 in the tax year 2024/25 will need to use Making Tax Digital from April 2026, but the threshold lowers to £30,000 in April 2027, and £20,000 in April 2028.
1. Know your numbers
Yes, you'll need to pay more attention to your accounting than you might be used to. But that means you'll actually know your financial position at any given moment.
Monzo is HMRC-recognised for supporting MTD. That means in a few taps of your banking app, you can see the cash flowing in and out, and understand how much you have to work with.
Compare this to how some businesses run — where you might only get this kind of insight once a year when it's tax return time and you're frantically digging through receipts.
Better data means better decisions too. Wondering if you can afford to hire that bit of kit? The data's there. Want to know your total business expenses on travel in the past month? You can check. Accurate, up-to-date financial information means you can think smarter and act faster.
2. Avoid nasty tax bill surprises
Here's a scenario everybody wants to avoid: January rolls around, and the tax bill is... way more than you expected. Ouch.
With MTD, you’ll do smaller, more manageable updates every quarter instead of all at once.
Being more clued up on your numbers means you can set aside what you'll actually need, rather than over-saving (and having money sitting doing nothing) or under-saving (and scrambling to find extra cash).
Of course, it's still an estimate, and you'll want to leave room for adjustments. But you can avoid setting aside far too much each year.
3. Catch mistakes before they become problems
Mistakes happen. Unfortunately, accounting mistakes can be expensive — both in fines and in the time it takes to fix them.
MTD makes it much harder to make mistakes in the first place, and easier to spot them when they do happen. Because you're checking your numbers every quarter, you're essentially doing a mini-audit four times a year.
Your software will automate most of the work needed for your quarterly reports. In many cases, you'll just need to check everything looks right and hit submit.
Think of it as regular health check-ups for your finances, rather than waiting until there's a major problem.
4. Think of it as technology for good
You’re bringing new technology into your business and that can help you work more efficiently.
Machine learning can automatically match incoming payments to invoices. You can snap a photo of a receipt with your phone, and the data gets captured automatically. Your bank feeds connect directly to your accounting system, or your bank is your accounting system, like with our Making Tax Digital ready account.
Once you're set up properly, you'll actually save time. All that automation? The bank reconciliation, the receipt capture, the automatic categorisation? That's time you're not spending on putting in the numbers yourself.
Plus, you're future-proofing your business. Like it or not, this is where things are heading. By getting on board with MTD now (or at least preparing for it), you're setting up systems and habits that will serve you well for years to come.
The bottom line
Change can feel daunting and MTD might seem like just another hoop to jump through.
Try not to think of it as just complying with new rules. You’re also getting to tidy up your finances. To understand your business better. To make smarter decisions. To stress less about tax.
Yes, it means adapting to new ways of doing things. But when you’re all set, it'll hopefully make doing business a breeze.
You can file tax straight from Monzo to HMRC, powered by Sage, ready for HMRC’s new rules coming in April 2026. Apply for a free business bank account to get on the waitlist.
Only sole traders or limited company directors in the UK can apply. Ts&Cs apply.