Canada Tax Glossary for the Self-Employed

A plain-English guide to Canada tax terminology. Whether you are filing your first self-assessment or managing ongoing CRA (Canada Revenue Agency) obligations, this glossary covers the key terms every freelancer and sole trader should know.

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 ex...
When does the Canadian tax year start and end?: Canada uses a calendar tax year, running from 1 January to 31 December each year. Your 2024 tax return covers income earned between 1 January 2024 and...
What are the Canadian federal income tax rates for 2024?: Canada's 2024 federal income tax rates for individuals are: | Taxable Income | Federal Tax Rate | |---|---| | C$0 – C$55,867 | 15% | | C$55,868 – C$11...
What is the Basic Personal Amount (BPA) and how does it reduce my tax?: The Basic Personal Amount (BPA) is a non-refundable tax credit that reduces the amount of federal income tax you owe. For 2024, the BPA is C$15,705. F...
How does provincial income tax work for self-employed Canadians?: In Canada, you pay income tax to both the federal government and your province or territory. Each province and territory sets its own tax rates and br...
How much CPP do self-employed Canadians pay?: The Canada Pension Plan (CPP) is Canada's mandatory public pension system. As a self-employed person, you pay both the employer and employee portions ...
Can I deduct CPP contributions as a self-employed person?: Yes — but only partially. As a self-employed person paying both the employer and employee portions of CPP, the CRA splits the tax treatment: **Employe...
Do self-employed Canadians have to pay Employment Insurance (EI)?: Employment Insurance (EI) is voluntary for self-employed Canadians — unlike employees who must pay EI premiums. You can choose to register for EI and ...
When do I need to register for GST/HST in Canada?: You are required to register for GST/HST when your worldwide taxable supplies (revenue) exceed C$30,000 in any single calendar quarter, or in four con...
What are the GST/HST rates in each Canadian province?: Canada has two types of sales tax: GST (federal) at 5%, and HST (Harmonized Sales Tax) in provinces that have combined their provincial sales tax with...
How do I file my GST/HST return in Canada?: Once registered, you must file GST/HST returns and remit any net tax owing. The frequency depends on your annual revenue: - **Annual revenue under C$1...
What are Input Tax Credits (ITCs) and how do I claim them?: Input Tax Credits (ITCs) are the mechanism by which GST/HST-registered businesses recover the GST/HST they paid on business purchases. ITCs prevent do...
What is a T1 Return and how do self-employed Canadians file it?: The T1 General Income Tax and Benefit Return is Canada's main personal income tax return. As a self-employed person, you file a T1 each year to report...
What is Form T2125 and what does it cover?: Form T2125 (Statement of Business or Professional Activities) is the CRA form that self-employed Canadians use to report their business income and exp...
What are the key CRA tax deadlines for self-employed Canadians?: Self-employed Canadians have different deadlines compared to salaried employees. Key dates for the 2024 tax year: **30 April 2025** — Balance owing du...
When do self-employed Canadians need to pay tax by instalment?: You are required to make quarterly income tax instalment payments to the CRA if your net tax owing (after deducting withholdings and credits) exceeds ...
What business expenses can self-employed Canadians deduct?: The CRA allows you to deduct any reasonable business expense that was incurred to earn income from your business. The core principle is the expense mu...
How do I claim home office expenses in Canada?: Self-employed Canadians can deduct home office expenses on Form T2125 (Part 6) if they meet either of these conditions: 1. The home office is your **p...
How do I claim vehicle expenses as a self-employed Canadian?: Self-employed Canadians can deduct vehicle expenses for business travel — but not for commuting between home and a regular workplace (which is persona...
What is the CRA mileage rate for 2024?: The CRA publishes per-kilometre rates primarily for employees and for employers to reimburse employees without a taxable benefit. For 2024: - **First ...