New data from London & Partners, the growth agency for London, shows that 46.18% of start-up founders are unfamiliar with their tax and compliance obligations. This lack of awareness in the early stages can expose businesses to avoidable risks, unnecessary costs, and even stalled growth.
Research conducted through the Grow London Local platform between January 2024 and September 2025, based on 968 responses from founders mainly across London, found that almost half (46.18%) of first-year businesses are unfamiliar with tax and compliance obligations; leaving many at risk of HMRC fines just as they start out.
Navigating HMRC can be complex, particularly for startups. The Grow London Local platform, by London & Partners, can help businesses that are unsure about their obligations or suspect there might be an issue, as tax rules can feel confusing at the start. Support and guidance are available to help founders clarify what needs to be done and reduce the risk of early mistakes.
Credit: London & Partners/Peter Cohen
As the new business season kicks off, Grow London Local is there to help entrepreneurs establish solid financial habits from the very beginning.
Vanesa Perez-Sanchez, Director of Small Business Service at London & Partners, emphasises the 
need to be on top of HMRC requirements:
“Tax returns can be mystifying, and it’s important for all business owners to build confidence, set a plan and know how to avoid penalties. For new entrepreneurs and business owners focussed on growing their business, their tax returns can be daunting. What matters is being aware that free support is available, and getting the basics right early on can save time, stress, and money later.”
Expert tips for getting tax and compliance right from the start:
Francis Fabrizi, Director of Keirstone Limited: “Many SMEs wait until deadlines approach but addressing HMRC requirements early avoids penalties and gives businesses more time to focus on growth.”
“The most important first step is to register with HMRC through their website or app as this creates a business tax account where deadlines and correspondence can be managed in one place. To set this up, business owners will usually need basic company details such as their Companies House registration number, the business address, bank account information and proof of identity for the business owner. Having these ready in advance speeds up the process and reduces delays.”
“If an individual operates more than one company, each business must be registered separately and must maintain its own records as combining accounts is one of the most common mistakes that leads to problems later. HMRC also provides useful tools once the account is active including VAT registration and access to support schemes.
One support scheme that many small business owners overlook is tax-free childcare which can be applied for through the HMRC account and provides up to £2,000 per child each year towards childcare costs.This can be a valuable support for working parents trying to balance family life with running a business.”
“Once the account has been set up, the best way to stay compliant is to review records regularly and keep digital copies of invoices and receipts. Setting calendar reminders for upcoming obligations is also a great help to plan and avoid missing important deadlines ensuring compliance becomes a routine part of running the business rather than a last-minute panic.”
Stephanie Odigie-Jones, Director of Co-Accounting Ltd: If you receive a penalty, make sure to file any overdue returns as quickly as possible”
Penalties can be issued when you are late to either submit a tax return or pay your tax bill. Our first recommendation if you receive a penalty is to submit any overdue returns as soon as possible. This minimises any further penalties or interest applied. The next step is to contact HMRC to arrange a payment plan. In many cases you can do this online through HMRC’s Time To Pay portal, but you can also contact them by phone.
Under Making Tax Digital (MTD), HMRC is changing the reporting timetable for sole traders and landlords, by introducing a quarterly reporting requirement. Late submissions are expected to attract penalties in the same way as other returns. If you had £50,000 or more from self-employment and rental income (before expenses and deductions) in the 2024/25 tax year, you will be included in the first phase of MTD and your first return will be due by 7 August 2026. If you are not sure, you can use HMRC’s online tool to check if you need to use MTD and when you need to start.
Jude Perera, CEO of Westridge Accountants: “Many small businesses miss out on legitimate tax-deductible costs such as home office expenses, travel and equipment, which is why it’s vital to track every expense carefully and keep receipts and invoices organised.”
“If part of your home is used exclusively for work, you may be entitled to claim home office deductions, while vehicle and travel costs, business equipment, supplies and even software subscriptions or online tools used in daily operations can also be included.”
“Larger purchases such as machinery or IT equipment may qualify for capital allowances over time, and small business tax credits or other incentives can provide additional relief if you know they exist, which is why keeping personal and business finances separate with a dedicated bank account makes it far easier to track claims. Above all, it’s wise to speak to a tax professional at least once a year to ensure deductions are maximised while staying up to date with changes in tax law so your business doesn’t miss out on valuable savings.”
