Growth talk is cheap while compliance costs £25bn a year

The government wants to talk about growth. Business Mentoring Councils, apprenticeship funding, rate cuts for pubs — all announced with the same message: we’re backing small business. Meanwhile, the Federation of Small Businesses has put a number on the thing quietly working against all of it: tax compliance now costs the average small business owner £4,500 and 44 hours a year, up 10% since 2021, and £25 billion across the sector as a whole. You can’t call that backing business. You can only call it noise until the number comes down.

The reasoning is simple enough. Every hour spent chasing HMRC’s phone lines — and over half of small firms say they struggle to get through — is an hour not spent on the business itself. Every pound paid for software, staff time, or an accountant just to stay compliant is a pound that didn’t go into stock, hiring, or a new customer. This isn’t a niche annoyance affecting a few unlucky firms; it touches all 5.5 million SMEs in the country, and it’s the kind of drag that shows up in the confidence surveys long before anyone traces it back to its actual cause.

What makes it worse is the timing. Making Tax Digital’s 2026 rollout lands on top of this existing burden, not instead of it — new software, new training, new admin, right as SMEs are already managing tighter margins. A parliamentary committee has now called for a 25% cut in these costs by the end of the Parliament. That’s the right instinct, but a target with no delivery date attached is easy to announce and easy to quietly miss.

None of this means digital tax reform is wrong in principle — simpler, more accurate records are a reasonable goal. But sequencing matters, and rolling out a bigger compliance ask before shrinking the existing one gets the order backwards.

Growth policy that ignores compliance cost isn’t really growth policy — it’s a press release. Until the £25bn figure starts falling, treat every growth announcement as aspiration, not action. Where do you land on this — is MTD’s timing a real problem, or are small businesses just being asked to modernise like everyone else already has?