Self-Employed Taxes Canada

Direct answer: Self-employed Canadians usually pay federal and provincial income tax on net business income, both the employee and employer portions of CPP on net self-employment earnings above $3,500, CPP2 on higher earnings, and GST/HST if registered and making taxable supplies. The tax feels heavy because no employer withholds it for you and no employer pays half of CPP on your behalf.

Primary sources: CRA: Sole proprietorships and partnerships; CRA: CPP rates and maximums; CRA: When to register for GST/HST.

What self-employed people usually pay

Primary sources: CRA: CPP rates and maximums; CRA: Sole proprietorships and partnerships.

• Income tax: federal plus provincial or territorial tax on taxable income after eligible deductions and credits.
• CPP: both the employee and employer CPP portions on net self-employment earnings above the basic exemption.
• CPP2: self-employed second additional CPP on earnings between the first and second earnings ceilings.
• GST/HST: collected and remitted if you are registered and your supply is taxable or zero-rated.
• Instalments: CRA may require quarterly instalments when your net tax owing is high enough in the relevant years.

2026 self-employed CPP formula

net business income = business revenue - eligible business expenses

base CPP = min((net business income, $74,600) - $3,500, $71,100) x 11.90%

CPP2 = earnings above $74,600 up to $85,000 x 8.00%

The 11.90% base CPP rate is the employee and employer 5.95% portions combined. CPP2 is also doubled for self-employment because the employee and employer portions are both 4.00%.

Worked example: consultant with $90,000 revenue

Item	Amount	Why it matters
Gross invoices	$90,000	Revenue before business expenses.
Eligible expenses	$12,000	Office, software, accounting, phone, home-office and similar eligible business costs can reduce net income.
Net business income	$78,000	Starting point for income-tax and self-employed CPP estimates.
Base CPP	$8,460.90	Maximum 2026 self-employed base CPP because net income is above the YMPE.
CPP2	$272.00	8.00% on the $3,400 between $74,600 and $78,000.
Total CPP/CPP2	$8,732.90	Before income-tax treatment of CPP deductions and credits.

GST/HST example

Primary sources: CRA: When to register for GST/HST; CRA: Input tax credits.

If an Ontario consultant is registered for HST and bills $45,000 of taxable services, the invoice HST is $5,850. If the same business paid $780 of eligible HST on commercial expenses, a simple regular-method estimate is $5,850 collected minus $780 input tax credits = $5,070 net HST remitted. GST/HST collected is not income; it is tax you hold for remittance.

Deductions to track carefully

Primary sources: CRA: Business expenses.

Expense type	Common documentation	Watch point
Software and subscriptions	Invoices, receipts, business purpose	Separate personal and business use.
Vehicle costs	Kilometre log, fuel, maintenance, insurance	Only the business-use portion is normally deductible.
Home office	Workspace calculation, rent or ownership costs, utilities	The workspace must support the CRA business-use test.
Meals and entertainment	Receipt, client or business purpose	Deductibility is often restricted.
Professional fees	Invoices from accountant, lawyer or advisor	Keep source documents for both income tax and ITCs.

Common mistakes

• Saving only for income tax: self-employed CPP can be a large separate bill.
• Treating GST/HST as revenue: collected GST/HST belongs in a liability bucket until remitted.
• Ignoring the $30,000 registration test: the test uses worldwide taxable supplies before expenses, not profit.
• Mixing personal and business accounts: messy records make deductions and ITCs harder to support.

Methodology and limitations

Verified July 29, 2026. The CPP example applies CRA's 2026 CPP maximum pensionable earnings, basic exemption, self-employed maximum and second additional CPP structure. GST/HST examples use Ontario's 13% HST and regular-method ITC arithmetic. This page does not cover incorporated owner-manager salary/dividend planning, Quebec QPP self-employment details, industry-specific deductions or professional tax filing advice.

Try your numbers

Use the Paycheck Calculator as a starting point for income-tax brackets, then adjust for self-employed CPP and business deductions. Related reading: GST/HST for small business, CPP and EI contributions, and Canadian tax brackets.

Sources: CRA sole proprietorships and partnerships; CRA CPP contribution rates and self-employed maximums; CRA second CPP contributions; CRA when to register and charge GST/HST; CRA input tax credits.