Tax red tape’s huge cost to small firms revealed in new report

Small Businesses Are Paying the Price — And Feeling the Pinch

Nearly £25 billion a year is the hidden toll that tax compliance takes on the UK’s 5½ million small firms, says a fresh FSB study. 60 % of owners admit the Government’s tax office has turned their stress meter into a roller‑coaster.

What the Numbers Tell Us

Average spend: £4,500 plus 44 hours of work each year on admin.
That breaks down into calling HMRC, hiring or training staff, software licences, and eye‑watering accountant fees.
Over 1400 businesses were surveyed – so it’s not just a handful of tired entrepreneurs.

The Service Sucks

Finding a good line on the phone to HMRC is like hunting for a needle in a haystack. A whole 72 % of firms call by phone, yet only 23 % of those actually get a decent experience.

Half of the respondents (52 %) feel HMRC is virtually unreachable. 60 % say the whole process cranks up their personal stress.

MTD Is Looming, Yet…

With the Making Tax Digital push, the deadline is tightening. If you’re turning over more than £50 k, you need to be digital by next April. Those between £30‑50 k have until 2027.

But 27 % of eligible businesses don’t even know when they’ll switch to the required software – the “digital gap” is real.

FSB’s Takeaway

Tina McKenzie, the FSB Policy Chair, sums it up:

“We’re giving up £4,500 + 44 hours every year to paperwork that could be used to grow the business.
That adds up to £25 billion and 240 million hours annually – a massive drag on UK growth.
Reducing this burden isn’t a pipe dream; a one‑third cut in admin costs is realistic if HMRC steps up.
HMRC is hiring 5,000 new compliance officers and 1,800 debt‑management staff – but they still need quicker answers and less dragging investigations.

In short, the system should be simple, not a maze and the tax office should feel more like a helpful friend than a bureaucratic villain. Small firms deserve a system that lets them focus on building rather than debugging paperwork.