Self-Employed Taxes in Canada

What self employed taxes in Canada include

Self employed taxes in Canada come in three parts. You pay income tax on your profit, you pay both halves of Canada Pension Plan contributions, and, once your sales pass $30,000, you collect and remit GST/HST. None of it is withheld, so you are responsible for setting the money aside.

• Income tax. Federal and provincial tax on net business income, meaning revenue minus eligible expenses, reported on form T2125 with your personal return.
• CPP contributions. An employee pays 5.95% and the employer matches it. When you are self-employed, you pay both: 11.9% on net earnings between $3,500 and $74,600 in 2026, plus 8% on earnings between $74,600 and $85,000 (the second tier, called CPP2). Quebec residents pay into the QPP instead.
• GST/HST. Not a cost to you, but money you hold for the CRA. See our guide to the small supplier threshold to check whether you have to register.
• EI. Optional. You can opt in to EI special benefits such as maternity, parental and sickness benefits, but self-employed people do not pay regular EI premiums.

Which expenses can you deduct?

You can deduct reasonable expenses you incur to earn business income. Every dollar of legitimate expense lowers both your income tax and your CPP, so good records pay off twice.

• Home office. A share of rent or mortgage interest, utilities, insurance and internet, based on the space used for work. See home office expenses in Canada for the rules.
• Vehicle. The business share of fuel, insurance, repairs and lease costs, supported by a mileage log.
• Equipment and software. Smaller items are expensed; computers and larger equipment are usually claimed over time through capital cost allowance.
• Professional fees, advertising, phone and supplies. Accounting fees, marketing, a business phone line and office supplies.
• Meals and entertainment. Generally only 50% deductible.

The CRA expects you to keep receipts and records for six years. EMOH Pay lets you photograph receipts, tag business expenses and track GST/HST paid, then export a PDF or Excel report for your accountant.

How much should you set aside for taxes?

The safest approach is to move a fixed share of every payment you receive into a separate tax account on the day it arrives. A useful starting point is your expected average rate of tax plus CPP. In the example above that is about 24% of profit. Because it applies to profit rather than revenue, the share of each invoice you need to set aside is lower when you have real business expenses.

If you are registered for GST/HST, move the tax you collect aside as well, since it was never yours. Review the percentage every quarter, because income that grows through the year pushes you into higher brackets.

EMOH Pay can turn this into a routine: set a tax savings goal, log each invoice as it is paid, and watch the balance against your estimate. Our freelancer budgeting app page and the guide to budgeting on an irregular income cover the wider plan.