How Small Policy Changes Are Breaking Small Business Systems

For more than twenty years I’ve helped small businesses grow, survive recessions, and modernise their systems. I’ve seen good years and bad, but I’ve never known a time when small firms have felt closer to breaking point than they do today.

Last week, I sent the following open letter to Blair McDougall MP, Parliamentary Under-Secretary of State for the Department for Business and Trade. He's the chap who's responsible for small business but also Companies House. It sets out how what looks like a small policy change such as the Companies House fee rises, can ripple through every layer of a business system, wasting time, killing productivity, and eroding confidence.

Before sharing the letter, here’s the short version of why I wrote it.

1. Tiny Changes, Big Consequences

When Companies House doubled and then tripled filing fees, it didn’t just cost a few extra pounds per form. For firms like mine, it meant reprogramming proposal software, revising contracts, and updating hundreds of automated workflows. Days of admin, for pennies of revenue.

That’s the part government rarely sees: every “small change” multiplies across thousands of firms, invoices, and systems. It's not just Companies House, it's every department. 

2. The Illusion of Efficiency

We’re told to “find efficiencies,” so we do. I’ve automated, streamlined, and even reduced headcount, yet when I deal with government departments, I face six-week waits, broken logins, and systems without APIs.

If small firms can build working tech prototypes in a weekend, why can’t the departments that claim to be “improving technology and enforcement” do the same?

3. The Hidden Cost of Constant Change

Over the past year, accountants have faced overlapping waves of reform — National Insurance increases, Making Tax Digital, FRS 102 changes, AML updates, Companies House reforms. Each change might make sense alone, but together they bury productivity.

Even high-tech firms like mine see service levels fall, which ironically raises the risk of mistakes the government is trying to prevent.

4. Inefficiency on Repeat

HMRC holds all the data it needs to collect unpaid taxes efficiently. Yet we still waste hours on manual disclosures that could be automated by one clear letter. Every layer of inefficiency costs the taxpayer twice, once in wasted time, and again in reduced productivity.

5. The Message It Sends

When it’s cheaper to close a company than start one, entrepreneurs notice. Policy signals matter. They shape behaviour, investment, and growth.

6. A Call for Practical Reform

Small firms aren’t short of innovation; they’re short of time. What we need are MPs who understand that every policy tweak echoes through real systems and real people.

I’m not asking for perfection — just for practical, coordinated reform that makes business easier to run, not harder.

Below is the full text of the letter I sent. Feel free to read it, share it, and discuss it.

If this feels familiar, you’re not alone. Most small firms I meet aren’t broken, they’re just running on outdated systems that no longer fit how business works today. That’s exactly why I created my Modernisation Diagnostic where we review your setup, spot wasted time and cost, and build a clear action plan for change.

You can apply for a Modernisation Diagnostic session here.

Open Letter to Blair McDougall MP

(Full text as sent on 3 November 2025)

Blair McDougall MP
Parliamentary Under-Secretary of State
Department for Business and Trade
Old Admiralty Building
London
SW1A 2DY

3rd of November 2025

Dear Mr McDougall,

Re: How small policy changes are breaking small business systems

As an entrepreneur who started my first business in 2003, I’ve seen both good years and bad, but I’ve never known a time when small businesses felt closer to breaking point.

The recent announcement of Companies House fee increases prompted me to write. I’m not writing to criticise; I’m writing because I believe there are still people in government who care about getting things right for small businesses.

On paper, the changes look minor but the numbers tell a different story. The cost to form a company rose from £12 to £50 in May 2024, a 317% increase, and is set to double again to £100 from February 2026. The fee for a confirmation statement climbed from £13 to £34 (162%) and will soon be £50, a 284% total rise.

What appears to be a simple administrative adjustment means that average fees have risen by about 500% in under two years. And for small firms like mine, that one change triggers a chain reaction the government rarely sees.

Tax and fee increases are a blunt instrument in today’s modern business environment. Rachel Reeves is maybe perplexed and wondering how the employers' NI increases haven’t filled her budget “blackhole” when her spreadsheet forecast said it would. The OBR and Commons Library keep saying the same thing: productivity is weak. So what’s that got to do with Companies House fees?

A small fee change lands on the desk of an accountant like me. I run an accountancy firm that supports over 200 limited companies. That one adjustment means reprogramming our proposal software, revising hundreds of contracts, and explaining to every client why their fixed price is suddenly wrong.

We’ve built automation to keep our fees stable and our staff efficient. Those systems rely on predictable data and a Companies House fee hard-coded at £13, for example. When that figure doubles or triples, we have to manually adjust around 200 client agreements, reissue engagement letters, and re-sync billing software. That’s several days of administrative work for a change worth pennies to the Treasury.

And while February may sound like plenty of notice, it isn’t. The announcement came on the last day of October, giving us only four billing cycles before the new fees apply. We have already agreed 12-month contracts with clients based on the old rates. The timing alone turns a price rise into a hidden tax on our time.

We’d only just finished adjusting our client contracts for the last fee increase. My first reaction to the new rise wasn’t about the money, it was the realisation that departments like Companies House and HMRC have become symbols of a wider issue: systems that no longer serve the people they were built to support.

If we pass the cost on, clients feel squeezed. If we absorb it, margins fall. Either way, it’s not Companies House that becomes more efficient, it’s another hour lost by small firms already under pressure.

That loss doesn’t end with us. It reduces our profit, which in turn reduces the Office for Budget Responsibility’s productivity score and explains why Rachel Reeves may find less tax coming in than her spreadsheet suggests. The policy looks sound on paper, but in practice, it bleeds productivity from the very people funding the system.

But this letter isn’t about Companies House fees, it’s about demonstrating that this is just one of many changes that are costing the government and our society dearly. 

1. The illusion of efficiency

After the 2024 Budget, ministers told both businesses and government departments to “find efficiencies.” Perhaps an ill-judged message when there was reportedly a £40 billion “blackhole” in the public finances.

So, I did as instructed and went out to find efficiencies. In my firm, we used AI and automation to streamline processes and reduce our headcount from 9.2 to 8, without losing output. Productivity went up. Ironically, the rise in Employers’ National Insurance was what pushed me to make that change, effectively trimming 13% of our staff.

So when Companies House justified yet another fee rise to “improve technology and enforcement,” I expected to see results, as surely they are also finding these same efficiencies? Instead, it took three calls and six weeks to activate our Authorised Corporate Service Provider account. The officer who finally helped said, “you’re the first one I’ve actually managed to get working.”

I’m dealing with basic system failure when I should be asking, “Where are the API connections that every other modern cloud provider offer; the ones that would let us integrate our already risk-assessed clients directly with Companies House?”

Am I asking too much? Around the same time, I built a prototype web app myself; scaffolded in Replit (a rapid AI build tool), stored in GitHub, and debugged using Codex via ChatGPT. It took two hours. Ten years ago, that same outcome would have needed three developers and eight weeks.

If a small firm accountant can move that quickly, are government departments working this dynamically? Do ministers realise that businesses my size now have access to technology that was science fiction only a few years ago?

If those last few paragraphs feel hard to follow, they should, because the business owners who do understand these technologies are already building the post-AI economy. They’re the ones shaping the future while the government risks being left behind.

In short, I’m underwhelmed by the government’s solutions. But Government departments have been busy layering other reforms on top, each one small in isolation, but together they’re suffocating small firms. 

2. The twelve-month storm accountants are facing

Over the past twelve months, accountants have faced a perfect storm of change. Employer NI rules forced us to recalculate 114 director payrolls and double our directors-only payroll fees. Making Tax Digital turned one annual return into four quarterly filings plus a year-end, pushing sole-trader fees from £350 + VAT to £750 + VAT not counting the paid bookkeeping software clients must now learn to use. One client, aged 58, has already retired early rather than “deal with the hassle.” Mid-year AML updates demanded new training, FRS 102 changes reshaping how we report leases and revenue, and Companies House reforms consumed 58 hours on director ID checks before most clients had even logged in. 

Each change alone might seem reasonable. Together, they overload the very people who keep the economy compliant and solvent. My firm is streets ahead of most when it comes to technology and automation, yet even we’ve seen a dip in customer service levels. That should worry anyone, because good service is what prevents negligence.

It leaves me asking whether we’re now so busy coping with constant change that we’re more likely to make a negligent mistake.

There are further regulatory reforms coming to the accountancy sector, and I’ll save my detailed views for another time. But if the government truly wants higher standards from accountants, it must first ease off the relentless pace of legislative change. We’re the only ones who can help the taxpayers cope with these changes. 

3. HMRC inefficiency and missed opportunity

Is it just Companies House being ineffective? Or could those fee increases be covered simply by finding efficiencies elsewhere?

I recently helped a client make a voluntary disclosure under the Let Property Campaign. They owed about £4,000 in unpaid tax dating back to 2011. HMRC has had access to Land Registry data, letting agent data collected under powers in the Finance Act for nearly a decade, yet no one had ever written to them.

That one case took hours of my time, drafting offers, waiting on responses, and recalculating penalties that HMRC then rejected and reissued. The client paid me around £1,000 + VAT to navigate a process that should have been automated years ago.

The irony is that HMRC already holds all the data. A simple letter could read:

“We’ve identified that you own a second property and have received rental income not declared on your tax return. Please submit details within 90 days. If you comply, a 30% penalty applies; after 90 days, it rises to 100%.”

That’s it. Clean, quick, and effective. Somewhere along the way, we seem to have forgotten Occam’s Razor, the idea that the simplest solution is usually the best. Instead, HMRC builds labyrinthine systems that depend on accountants to fix them. The taxpayer ends up paying twice: once to me, and again through their taxes to fund the inefficiency.

I didn’t finish that job with a sense of satisfaction, but with bemusement that something so obvious could have been resolved years ago.

I could show you hundreds of similar examples every week, from HMRC, councils, government agencies, even the NHS, where money is poured down the drain. It breaks my heart to say it, but many departments are becoming symbols of frustration for the public. There’s a growing belief that any interaction with a government body will be unjust, inefficient, expensive, and outdated. Writing that genuinely saddens me, but softening the words would only deny what I hear from business owners every day.

As an accountant, I see thousands of transactions across dozens of sectors and hear first-hand the stories behind them. Those stories are remarkably similar and deeply telling.

4. The message these policies send

Policy signals matter. When it becomes easier and cheaper to close a company than to start one, entrepreneurs read that as a warning, not an invitation.

Every additional form, rule change, or failed digital system shifts the incentive from innovation to caution. It tells accountants and business owners alike that careful compliance counts for more than creativity or growth and that is not the foundation of a productive economy.

5. A call for practical reform

The UK doesn’t lack innovation; it lacks coordination. Businesses like mine are adapting faster than the government. We need policy-makers who understand that every “small change” multiplies through thousands of small systems, invoices, and people.

I wrote to Rachel Reeves late last year explaining why I won’t be growing my firm. The numbers speak for themselves. To earn an extra £10,000 personally, I’d keep only about £3,100 once corporation tax, dividend tax, and the loss of child benefit are factored in. To generate that £10,000 in profit, my company would need to increase turnover by £50,000 to £60,000, likely meaning another member of staff at a time when employment law is more complex and employers' costs remain high.

So I’ve chosen a different path. I’ve trimmed poor-fit clients, raised fees, and streamlined the team. I’ve bought an electric car, installed a heat pump, paid off my mortgage, and built up my ISAs. In other words, I’m doing exactly what current government policy rewards: not growing, but consolidating.

I’ve positioned myself to be financially resilient, so if government policy pushes business owners like me to breaking point, I’ll survive. The question is, how many of the economically active population can say the same? Push entrepreneurs too hard, and when the system breaks, they won’t come back to fix it.

Even as an MP, you might read this and quietly ask yourself whether you’re financially resilient enough to weather the next change. It’s coming sooner than you think.

By the time this letter reaches your desk, I’ll already have adapted because that’s what small businesses do. But we shouldn’t have to keep surviving despite the system that’s meant to support us.

What small business owners need now isn’t another consultation or headline announcement. We need MPs who will fight for us, who will challenge inefficiency, call out broken systems, and demand that policy be built with small firms in the room, not done to them from above.  

We don’t expect perfection. We just want to see that someone in Westminster still believes in enterprise as a force for good and is willing to defend it. 

Yours sincerely,
Justin Turner
Director

Cc:

The Rt Hon Rachel Reeves MP, Chancellor of the Exchequer
Chi Onwurah MP, Member of Parliament for Newcastle upon Tyne Central