Tax compliance costs represented significant burdens for small and medium enterprises, particularly in developing economies where tax systems were complex and SME resources were limited. Kagadi District, located in Western Uganda, hosted approximately 2,847 registered SMEs as of September 2023, contributing substantially to local employment, economic activity, and tax revenues. This study investigated the influence of tax compliance costs on SME performance in Kagadi District, conducted between July 2023 and March 2024. Tax compliance costs were examined across four dimensions: monetary costs including tax consultant fees and software expenses, time costs involving hours spent on tax matters, psychological costs reflecting stress and anxiety associated with compliance, and administrative costs related to record-keeping and documentation requirements. SME performance was measured using financial indicators including revenue growth, profitability, and cash flow adequacy, and non-financial indicators including business expansion, employment creation, and investment capacity. The study employed a descriptive correlational research design utilizing mixed methods approaches. From 2,847 registered SMEs in Kagadi District, a sample of 351 SMEs was determined using Yamane's formula and selected through stratified random sampling across three sectors: retail trade (168 SMEs), services (112 SMEs), and manufacturing (71 SMEs). Data collection utilized structured questionnaires administered to 351 SME owners/managers, supplemented by key informant interviews with 8 Uganda Revenue Authority officials, 6 tax consultants, and 4 local government revenue officers. Document analysis of tax compliance records and financial statements covered fiscal years 2021-2023. The questionnaire demonstrated high reliability with Cronbach's Alpha of 0.879. Data analysis employed SPSS version 29, utilizing descriptive statistics, Pearson correlation analysis, and multiple regression models to establish relationships between tax compliance cost dimensions and SME performance indicators. Findings revealed that tax compliance costs significantly and negatively influenced SME performance (r=-0.764, p