How does tax work for self-employed Canadians?

As a self-employed person in Canada, you pay federal and provincial income tax on your net business income — total revenue minus allowable business expenses. You report this on your T1 General Income Tax and Benefit Return each year using Form T2125 (Statement of Business or Professional Activities). Unlike employees, no tax is automatically withheld from your business income. You are responsible for setting money aside throughout the year and making tax payments. If your net tax owing exceeds C$3,000 (C$1,800 in Quebec), you will also need to pay quarterly instalment payments. You also pay both the employer and employee portions of Canada Pension Plan (CPP) contributions — a combined rate of 10.9% on net self-employment income between C$3,500 and C$68,500 (2024). Employment Insurance (EI) premiums are optional for self-employed individuals. Your combined federal and provincial/territorial tax rate depends on where you live, as each province sets its own rates on top of the federal tax.

• Tax on net business income (revenue minus allowable expenses)
• File T1 Return annually + Form T2125 for business income
• Pay both employer and employee CPP: 10.9% combined (2024)
• Instalment payments required if tax owing exceeds C$3,000
• Provincial/territorial tax adds to federal rate — varies by province