Xero Sees 'Emotional Tax' On Small Business From Financial Stress

Why It Matters

The findings highlight a hidden productivity drain that could suppress growth across the small‑business sector, prompting accountants and lenders to prioritize stress‑mitigating solutions.

Key Takeaways

• 81% report increased stress vs prior years
• Rising costs cause 44% of stress
• Owners lose 33 workdays annually to worry
• 40% consider quitting their business
• Stress reduces sleep and creativity

Pulse Analysis

Financial anxiety has become a defining characteristic of the U.S. small‑business landscape, a trend highlighted by Xero’s Emotional Tax Return 2026 Report. Surveying 300 owners with fewer than 200 employees, the study found that 81 % feel more stressed than in previous years, losing the equivalent of 33 working days per annum to worry. The primary drivers—rising input costs and unpredictable demand—mirror broader macroeconomic pressures such as inflation and supply‑chain disruptions. This emotional burden not only erodes personal well‑being but also translates into measurable losses in sleep, creativity, and operational focus.

The ripple effects of this stress manifest in concrete business outcomes. Nearly three‑quarters of respondents admit that anxiety hampers their work, while 34 % say it causes missed opportunities and 28 % report delayed decision‑making. Behavioral changes are evident: 41 % exercise less, 11 % engage in doom‑scrolling, and 28 % become short‑tempered with colleagues. For accounting platforms like Xero, the data underscores a market need for tools that not only streamline finances but also provide real‑time insights and cash‑flow forecasting to alleviate uncertainty and restore confidence.

Addressing the ‘emotional tax’ will require coordinated action from entrepreneurs, advisors, and policymakers. Financial‑literacy programs, flexible financing options, and mental‑health resources can mitigate the hidden costs of stress, preserving productivity and long‑term viability. Investors are likely to scrutinize stress‑related metrics as early warning signs, potentially influencing capital allocation toward resilient firms. As the economy stabilizes, businesses that proactively manage both the fiscal and psychological dimensions of risk will gain a competitive edge, turning a crisis of confidence into an opportunity for sustainable growth.

Xero sees 'emotional tax' on small business from financial stress

By Michael Cohn

February 12, 2026, 4:27 p.m. EST

Small business owners are losing the equivalent of 33 working days a year due to financial stress, according to a report released Thursday by small‑business accounting software maker Xero.

The company’s Emotional Tax Return 2026 Report polled a group of 300 U.S. small‑business owners with fewer than 200 employees and found that 81 % said their work has been more stressful than in previous years. The main contributors to their financial stress were rising costs (44 %) and unpredictable demand (28 %). On average, the business owners who responded to the survey spend eight hours a week consumed by worry, and nearly three‑quarters (74 %) say stress has negatively impacted their work.

Visualization created with AI assistance based on original reporting.

Some 40 % of the respondents said they have considered giving up their business entirely, while 34 % said stress has caused them to miss opportunities, 43 % admitted hiding business‑related stress from their partner or family, and 61 % reported getting less sleep than before starting their business, with nearly a quarter losing five or more hours of sleep per night. Other impacts of financial stress included stifled creativity (30 %) and delayed decision‑making (28 %). To deal with the stress, 41 % of the small‑business owners polled reported exercising less, with 3 % admitting they stopped exercising altogether.

“Ongoing financial stress has become a persistent and defining factor in how small businesses operate,” said Andrew Kanzer, managing director for North America at Xero, in a statement.

Over one‑fourth (28 %) of the business owners surveyed report being short‑tempered with others when they are stressed, while 11 % now spend their time “doom‑scrolling” on their phones, negatively impacting their productivity.

Michael Cohn – Editor‑in‑chief, AccountingToday.com