Freedom from penalty, but Im small-minded about it (8)
I believe the answer is:
impunity
'freedom from penalty' is the definition.
'impunity' can be an answer for 'freedom' (impunity is a kind of freedom). I am not certain of the 'from penalty' bit.
'im small-minded about it' is the wordplay.
'small minded' becomes 'puny' (I am not sure about this - if you are sure you should give a lot more credence to this answer).
'about' is an insertion indicator.
'puny' enclosing 'it' is 'punity'.
'im'+'punity'='IMPUNITY'
'but' is the link.
Can you help me to learn more?
(Other definitions for impunity that I've seen before include "Complete protection from unpleasant consequences" , "Freedom from punishment" , "Exemption from punishment or loss" , "Not subject to the normal consequences" , "Rascal, by agreement, gets exemption" .)