Insights
Monthlii: What It Means for Customers Tax and Cash Flow
1 September 2026
| 4 min read
When a business invests in new software, whether that's an ERP rollout, a CRM implementation or an annual licence renewal, the bill often arrives upfront. Paying monthly through Monthlii lets you spread that cost over the life of the project, and in most cases the tax treatment is easy to follow.
This guide explains the main points. Tax treatment depends on your circumstances and on how your agreement is structured, so always confirm the detail with your accountant.
Monthly payments are usually a business expense
For most profitable UK limited companies, monthly payments for software and related services are treated as a business expense. That means they can be deducted from your taxable profits, which reduces your Corporation Tax bill.
With most technology investment now in services rather than hardware, this covers more than just the licence. Implementation, consultancy, data migration, integration and training are all part of what Monthlii can fund.
The cost of finance itself is generally deductible as well, so you aren't paying tax on the cost of spreading the payments.
VAT is spread, not paid upfront
If your business is VAT registered, you can usually reclaim the VAT. Depending on how the agreement is structured, VAT is either charged on each monthly payment or paid at the start. If it's charged monthly, you avoid a large upfront VAT payment as well. Your Monthlii quote will show how VAT is handled.
The real advantage is cash flow
Tax relief matters, but the bigger benefit is timing.
Software projects often need paying for months before they deliver a return. Paying monthly matches the cost to the period when the system is actually working for you. Your cash stays in the business for hiring, stock, marketing or simply a buffer, rather than being tied up in one invoice.
It also means the budget doesn't have to decide the scope. Instead of cutting integrations or pushing training to "phase two", you can do the project properly first time.
An example
Illustrative only. Actual payments depend on the term, the amount and credit approval.
| Software and implementation | £20,000 + VAT |
| Term | 3 years |
| Monthly payment | £658 + VAT |
| Total paid over the term | £23,688 |
| Upfront outlay in month one | £658 instead of £20,000 |
| Tax relief at the 25% main rate | £5,922 |
| Net cost after tax relief | £17,766 |
Companies with profits under £50,000 pay the 19% small profits rate, which would give tax relief of £4,500.72 and a net cost of £19,187.28. Companies with profits between £50,000 and £250,000 pay a rate in between, through marginal relief.
Buying outright would also usually attract tax relief, so the main difference is cash: £658 leaves the business in month one instead of £20,000.
Monthly terms on renewals too
Annual renewal invoices can be just as hard on cash flow as a new project. Monthlii can spread renewals over monthly payments too, so a large, predictable bill no longer has to land in one go.
Frequently asked questions
Are monthly software payments tax deductible?
In most cases, yes. They're treated as a business expense and deducted from taxable profits. Your accountant will confirm the treatment for your agreement.
Does it cover services as well as software?
Yes. Monthlii can fund licences, subscriptions, implementation, consultancy, data migration, integration, development, training, managed services and renewals.
Can I reclaim the VAT?
If you're VAT registered, usually yes. How and when it's charged depends on the agreement structure.
Is paying monthly more tax efficient than paying upfront?
Not necessarily on its own, as both usually attract tax relief. The advantage is spreading the cost, protecting cash and spending as the system delivers value.
Who is it for?
Monthlii works with UK limited companies buying business software and services. We don't currently fund sole traders or small partnerships.
For software providers and partners
"If you sell, implement or support business software, offering monthly payments to your customers makes the conversation easier. Customers can buy the full scope, decide faster and spread renewals, and you're paid in full upfront."
This guide is general information, not tax advice. Tax treatment depends on individual circumstances and may change. Please speak to your accountant or a qualified tax adviser.
FAQs
Do we have to choose between the API and working with a person?
No. You get both and choose what will work best for your business. Integrating streamlines the process, straightforward deals flow through the API, widget or Quotation Builder with no involvement from your team. When a deal is complex, you call your account manager. Each deal takes the route it needs.
How fast are decisions?
Decisions come back in minutes. Complex cases, such as larger or multi-year deals, take no more than 1 hour.
What if a funder says no?
Because we work with a panel of over 25 funders, a decline from one isn't the end. Your account manager will look for another route across the panel and keep you and your customer informed.
Who takes the risk if a customer misses a payment?
We do! You've been paid in full upfront, so credit risk and collections sit with us, not with you.
What happens if the customer adds licences, modules or services mid-contract?
No problem. We can add another agreement to run alongside the customer's existing one. They can finish on the same date as the current agreement, so everything renews together, or run on their own term if that suits the customer better.
Can we finance multi-year contracts and bundles?
Yes. The multi-year contract builder packages software licences, hardware and services into one agreement, with a standard annual uplift built in, and gives your customer one flat monthly fee.
Can we offer 0% finance, deferred starts or milestone payments?
Yes. You can cover the finance cost to offer 0%, delay your customer's first payment until go-live, or release funds in stages through an implementation. Your account manager will set out what each option costs, so you can choose the one that fits your offer. Subject to funder and status.
Can our resellers offer monthlii too?
Yes. We can set up your channel partners with the same monthly offer and rates, so your customers see consistent pricing however the deal is sold.
How much developer time does integration take?
Two to three days for the full API build, spread across the five stages. The drop-in widget needs none, and many partners start there.
Latest insights
The biggest cost in business software isn't the software any more
Implementation, consultancy and professional services now make up a large share of every technology project. If your customers can only finance the licence, they're only financing part of the decision.
Read article
"There's No Budget for That": How to Keep the Deal Moving
Most software deals don't die because the customer doesn't want the solution. They stall because the cost lands at the wrong time. Monthly payments change that.
Read article