GDPR for small business: simple steps to help you stay compliant
GDPR compliance protects your small business from hefty fines and builds customer trust.
Written by Lena Hanna—Trusted CPA Guidance on Accounting and Tax. Read Lena's full bio
Published Wednesday 5 November 2025
Table of contents
Key takeaways
• Implement a comprehensive data audit to identify all personal information your business collects, verify you have legal basis for processing each type of data, and establish clear processes for handling customer access and deletion requests.
• Update your privacy notices and contracts to use clear, concise language that customers can easily understand, ensuring all agreements include proper data protection clauses and are readily accessible.
• Designate a specific team member to oversee GDPR compliance efforts, train your staff on proper data handling procedures, and determine whether your business requires a formal Data Protection Officer.
• Establish robust security measures including encryption, access controls, and regular system updates, while creating a breach response plan that includes procedures for detecting, reporting, and managing data incidents within required timeframes.
What is GDPR?
GDPR is the European Union's data protection regulation that controls how businesses handle personal information. It came into effect in May 2018.
The regulation protects EU residents' privacy by giving them control over their personal data. This includes how companies collect, store, and use their information. If you process personal data about people in the EU, GDPR applies to your business—no matter where you are in the world.
Does GDPR apply to small businesses?
Yes, the General Data Protection Regulation applies to businesses of all sizes, including small businesses, startups, and sole traders. There’s no minimum size threshold. If your business processes, stores, or manages the personal data of anyone located in the European Union (EU)—whether they’re customers, clients, or website visitors—you need to comply.
This applies even if your business isn’t in the EU. The regulation protects people in the EU, so their location matters more than yours.
What does GDPR mean?
The General Data Protection Regulation (GDPR) covers several key areas that affect how you handle customer and employee data:
- personal data about people in the EU, including customers, employees, suppliers, and anyone else you collect data from
- collecting personal data only when you have a legal reason, and making it clear how you’ll use it
- making user contracts and terms clear and easy to understand, without complicated legal text
- giving people the right to know what information you hold about them, and requiring you to respond within one month without charging a fee
- allowing customers to ask you to delete their personal data, unless you need to keep it for legal reasons
- letting people request a digital copy of their personal data to use as they choose
- reporting certain types of data breaches to the relevant authority
The UK government adopted the General Data Protection Regulation (GDPR) into UK law before Brexit, so if you’re a UK company, you have the same obligations.
GDPR penalties and fines
If you don’t follow the General Data Protection Regulation, you could face significant penalties. Regulators issue fines based on the severity of the violation. Knowing the consequences helps you see why compliance matters for your business.
There are two main tiers of fines. Less severe violations can result in fines of up to €10 million or 2% of your business’s worldwide annual revenue from the previous year, whichever is higher.
More serious violations can lead to fines of up to €20 million or 4% of your worldwide annual revenue. These penalties encourage all businesses to take data protection seriously.
GDPR and data protection
The General Data Protection Regulation (GDPR) gives individuals control over their personal data and requires businesses to protect that information properly.
The regulation was introduced to address issues where companies previously:
- Sold customer email addresses without permission
- Exposed sensitive data to unauthorized people
- Failed to protect data against hackers
Now, you need to make data protection central to how you run your business. This applies to all companies that handle personal data, including small businesses.
Does GDPR affect data security?
The General Data Protection Regulation (GDPR) requires businesses to keep personal data secure through proper storage and protection measures.
You need to:
- Secure storage: Protect all personal data you collect and store
- Safe transfers: Use approved mechanisms when moving data outside the EU
- Proper safeguards: Implement appropriate technical and organizational measures
If you transfer personal data to companies outside the EU, make sure they have adequate data protection measures in place.
Summary of GDPR for small business
General Data Protection Regulation (GDPR) compliance centers on treating personal data ethically and transparently. This means handling customer and employee information with the same care you’d want for your own data.
Follow these steps to achieve compliance:
Check products and services
To check your products and services for compliance:
- Audit your data collection to identify which products or services collect personal information
- Verify you have a legal basis for processing each type of data
- Set up processes to handle customer access and deletion requests
Review notices and contracts
To review your notices and contracts:
- Update privacy notices to make them clear, concise, and easily accessible to customers
- Review contracts to ensure customer agreements include proper data protection clauses
Assign responsibility
To assign responsibility for data protection:
- Designate a team member to oversee compliance efforts
- Determine if your business needs a formal Data Protection Officer
- Train your team on proper data handling procedures
Take care over security
To keep your data secure:
- Implement security measures such as encryption, access controls, and regular updates
- Monitor your data systems by regularly reviewing and testing your security measures
- Plan for breaches by establishing procedures for detecting and reporting data incidents
Managing GDPR compliance with confidence
Navigating the General Data Protection Regulation (GDPR) might feel like a challenge, but it’s an opportunity to build trust with your customers by showing you respect their data. By putting clear processes in place and using secure tools, you can manage compliance with confidence.
Xero helps you keep your financial records organized and secure, giving you a clear view of your business’s health. With your finances in order, you can focus on running your business and serving your customers.
See how Xero can support your business with a free month to get started.
FAQs on GDPR for small businesses
Here are common questions small business owners might have about GDPR.
What is the minimum company size for GDPR compliance?
There is no minimum size. The General Data Protection Regulation (GDPR) applies to any organization that processes the personal data of individuals in the EU, whether you’re a sole trader, a startup, or a larger company.
What are the penalties for GDPR non-compliance?
Fines for non-compliance can be substantial, reaching up to €20 million or 4% of your global annual revenue, whichever is higher. The amount depends on how serious the violation is.
Do I need special software for GDPR compliance?
No single piece of software can make you compliant with the General Data Protection Regulation (GDPR), as you also need to update your internal processes. However, using secure, cloud-based systems for handling data, including financial information, is a key part of your compliance strategy.
GDPR resources for small businesses and advisors
For additional guidance:
Disclaimer
Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.
Get one month free
Sign up to any Xero plan, and we will give you the first month free.