A new study highlights a concerning trend among London’s entrepreneurs: nearly half of start-up founders are unsure about their tax and compliance duties, putting them at risk of penalties and unnecessary setbacks during their most vulnerable stage.
Research from the Grow London Local platform—run by London & Partners—surveyed 968 start-up founders between January 2024 and September 2025. The findings reveal that 46.18% of first-year businesses admit to being unfamiliar with essential tax obligations, making them susceptible to fines and avoidable costs from HMRC.
Why This Matters for Start-Ups
In the early days of launching a business, navigating tax requirements can be overwhelming. But ignoring these obligations can delay growth and drain resources that new businesses can’t afford to lose.
Grow London Local offers tools and guidance to help new business owners make sense of these responsibilities and stay compliant from day one.
Vanesa Perez-Sanchez, Director of Small Business Services at London & Partners, said:
“Tax rules can be confusing, especially for first-time founders. But free support is available. Taking time to understand the basics early on can prevent stress and financial loss later. It’s about building confidence and avoiding unnecessary penalties.”
Expert Advice on Staying Compliant
Francis Fabrizi – Director, Keirstone Limited
“Don’t wait for tax deadlines to act. Taking early steps not only prevents penalties but also gives you more freedom to focus on growth.”
Fabrizi recommends setting up a Business Tax Account through HMRC’s website or mobile app. Founders will need their Companies House registration number, business address, proof of ID, and bank details. He also stresses the importance of setting up separate tax accounts for each business if you run more than one.
Additionally, Fabrizi notes that many new entrepreneurs overlook available support like Tax-Free Childcare, which offers up to £2,000 per child per year for eligible parents.
To stay on top of compliance, he suggests:
- Keeping digital records of all invoices and receipts
- Regularly reviewing financial records
- Using calendar reminders for upcoming deadlines
Stephanie Odigie-Jones – Director, Co-Accounting Ltd
“If you’ve received a penalty, your first move should be to file any overdue returns right away. Then speak to HMRC about a payment plan.”
Odigie-Jones also warned about Making Tax Digital (MTD), which is set to reshape how sole traders and landlords report their income. From August 2026, those earning over £50,000 in self-employed or rental income must begin submitting quarterly digital returns under MTD rules. You can check your eligibility using HMRC’s online tool.
Jude Perera – CEO, Westridge Accountants
“Too many businesses miss out on legitimate tax deductions—simply because they don’t keep proper records.”
Perera advises tracking all expenses meticulously. Deductions may include:
- Home office costs
- Travel and vehicle expenses
- Business software and tools
- Equipment and capital allowances
He also stresses the importance of maintaining separate business and personal finances and recommends speaking with a tax adviser annually to ensure compliance and maximize tax reliefs.
Getting It Right From the Start
The findings make it clear: early tax knowledge can protect start-ups from unnecessary stress, financial penalties, and compliance errors. With accessible platforms like Grow London Local and expert advice readily available, London’s new entrepreneurs can build stronger foundations and avoid common pitfalls.
As the new business season unfolds, being proactive about tax isn’t just a good habit — it’s a crucial step toward sustainable growth.