Can a Small Business Be Fined Under GDPR?

Every small business should take note: in 2024, the UK’s Information Commissioner’s Office (ICO) issued 18 monetary penalties under data protection laws. If you think fines are just for big tech companies like Google or Meta, think again. Even a small business can be fined under GDPR if it mishandles personal data, sends marketing emails without permission, or fails to report a data breach.

The good news is that most GDPR fines can be avoided. With some awareness, good habits and practical compliance steps, your business can protect itself, its customers and its reputation.

What Is GDPR and Why Does It Matter?

Let’s start with the basics. GDPR stands for the General Data Protection Regulation, a law designed to protect people’s personal data such as names, contact details and online activity. It was introduced by the EU in 2018 and later adopted into UK law after Brexit through the Data Protection Act 2018 and UK GDPR.

The purpose of GDPR is simple: to give people more control over how their personal information is collected and used. Whether you run a small online shop, a local café or a design agency, if you handle personal data, even just customer emails or employee details, you must comply with GDPR.

In the UK, the law is enforced by the Information Commissioner’s Office (ICO). The ICO ensures that organisations treat people’s information responsibly and can take action, including issuing fines, if businesses fail to do so.

But GDPR is not just about avoiding penalties. It’s also about building trust. Customers are far more likely to do business with companies that respect their privacy and handle data carefully.

Can a Small Business Really Get Fined Under GDPR?

Yes, and it happens more often than many people realise. Some small business owners assume GDPR only applies to large organisations with big data systems, but that isn’t the case. The rules apply to anyone handling personal information, regardless of size or turnover.

If your small business processes, stores or shares customer or employee data, you must follow GDPR principles. That includes having a legal reason to collect data, keeping it safe and being transparent about how you use it. If you fail to meet these responsibilities, the ICO can issue a warning, an enforcement notice or a financial penalty.

The scale of the fine depends on the seriousness of the breach. There are two levels of penalties:

• Up to £8.7 million or 2% of annual global turnover for less serious breaches such as poor record keeping.
  
• Up to £17.5 million or 4% of global turnover for serious breaches such as unlawful processing or ignoring people’s data rights.
  

Although these are the upper limits, the ICO takes a fair approach. For small businesses, fines are usually smaller but can still cause serious damage, especially when combined with reputational harm and loss of customer confidence.

Common Reasons Small Businesses Face GDPR Fines

There are a few common problems that tend to catch out small businesses when it comes to GDPR compliance.

1. Poor Data Security

The most common cause of GDPR fines is failing to protect people’s personal data. If customer information is lost, stolen or accessed by unauthorised people because your systems were not secure enough, your business could be held responsible. Simple mistakes such as weak passwords, unencrypted files or leaving sensitive paperwork on desks have all led to real fines.

2. Treating GDPR as a One-Off Job

Some small businesses treat GDPR as a box-ticking exercise, writing a privacy policy once and never reviewing it again. But data protection isn’t something you complete once. Your systems, staff and working methods change over time, so your data protection approach should too. Just as health and safety is an ongoing responsibility, so is GDPR compliance.

3. Sending Unwanted Marketing Messages

Many fines relate to marketing breaches, particularly under the Privacy and Electronic Communications Regulations (PECR). If you send marketing emails, texts or calls without proper consent, you could be fined. Consent must be freely given, informed and specific. Pre-ticked boxes or unclear wording don’t count. The “soft opt-in” rule allows marketing to existing customers in some cases, but you must always give people a clear way to opt out.

4. Failing to Report a Data Breach

Under GDPR, if a data breach occurs, for example customer details are accidentally exposed, you must report it to the ICO within 72 hours. Many small businesses are fined not just for the breach itself, but for failing to report it quickly. Acting fast and being honest can help reduce the size of a penalty.

5. Forgetting to Pay the ICO Fee

Every business that processes personal data must pay a data protection fee to the ICO unless exempt. It’s a simple task but one that’s often overlooked. Not paying can lead to an automatic fine.

How to Avoid GDPR Fines as a Small Business

The best way to avoid GDPR fines is to make data protection part of your everyday business routine. Think of it as good housekeeping for information.

Start by carrying out a data audit to find out what personal data you collect, where it’s kept and who can access it. Delete anything you don’t need. GDPR promotes data minimisation, which means only keeping what’s necessary for your business.

Next, check your security measures. Use strong passwords, enable two-factor authentication and keep your software updated. Encrypt sensitive files and store backups securely.

Review your Privacy Policy to make sure it’s clear, easy to read and up to date. It should explain what data you collect, why you collect it and how people can contact you if they have concerns.

Training staff is just as important. Anyone who handles personal data should know the basics of GDPR and understand what to do if there’s a problem. Many issues occur because employees simply aren’t aware of their responsibilities.

Finally, have a straightforward plan for dealing with data breaches. This should outline who is responsible for responding, who to contact and how to notify the ICO. Acting promptly and clearly can make a big difference if something goes wrong.

For many small businesses, getting professional advice from a data protection specialist is a worthwhile investment. It ensures your policies and systems meet GDPR standards and helps you avoid costly errors later.

What Happens If a Small Business Breaks GDPR Rules?

If a small business fails to meet GDPR requirements, the ICO can respond in several ways. In minor cases, it may issue a warning or ask you to change how you handle data. In more serious cases, it can impose financial penalties.

However, the impact often goes beyond the fine itself. News of a GDPR breach can spread quickly, damaging your reputation and leading customers to lose confidence. You might also face legal action from people affected by the breach, or have to pause parts of your business if ordered to stop certain activities.

The ICO will usually consider the steps you’ve taken to comply. If you can show you’ve acted responsibly and made genuine efforts to protect people’s data, the regulator is more likely to help you fix the problem rather than punish you. Being open and accountable always helps your case.

Why GDPR Matters for Every Small Business

In conclusion, GDPR is not just for large organisations. It’s a vital safeguard that protects both businesses and customers. For a small business, following GDPR helps you avoid fines, maintain a good reputation and build stronger relationships with your clients.

By understanding your responsibilities, keeping your systems secure, training your team and being open about how you handle data, you can stay compliant with confidence. Good data protection shows your customers that their privacy matters to you, and that’s something every successful business should value.

If you’d like practical guidance or tailored support in creating a clear, workable GDPR plan for your business, contact Arc Data Protection today and make compliance one less thing to worry about.