If you freelance in Canada, no employer withholds your tax. You owe income tax, Canada Pension Plan contributions and, once you grow past a set limit, GST or HST, all from the same income. This guide sets out the 2026 federal brackets, the CPP bill in full, and a worked example you can copy for your own numbers.
Search intent: you want to know what self-employed taxes in Canada consist of, how much they take in 2026, and when you pay them. Rates last reviewed: October 2026, for the 2026 tax year. Figures are checked against the Canada Revenue Agency (CRA).
What taxes do self-employed people pay in Canada?
As a self-employed person in Canada you pay three separate charges on your work: federal and provincial income tax on your net business income, Canada Pension Plan contributions on that same income, and GST or HST on your sales once you pass the small supplier limit.
Those charges behave differently, and mixing them up is where most mistakes start. Income tax is charged on profit, not on everything you bill. CPP uses the same income, but with its own exemption, ceilings and rates. GST and HST are charged on sales, collected from clients, and held for the CRA. Tax you collect is never your income.
You report business income on Form T2125, the Statement of Business or Professional Activities, as part of your personal T1 return. A sole proprietor and the business are the same taxpayer in Canada, so there is no separate business tax return and no separate business rate. Your net business income joins any other income you have, and the combined total is taxed at personal rates.
| Charge | Charged on | Who sets it |
|---|---|---|
| Federal income tax | Net business income, in slices by bracket | Federal government, collected by the CRA |
| Provincial or territorial income tax | Same net income, at your province rates | Your province or territory (Quebec files separately with Revenu Quebec) |
| CPP contributions | Net business income between the exemption and the ceilings | Canada Pension Plan (QPP in Quebec) |
| GST or HST | Your taxable sales, once registered | CRA (QST in Quebec is separate) |
Business expenses matter from the start. Workspace rent, software, phone, professional fees and the business share of vehicle and home office costs all reduce net business income, which reduces both income tax and CPP. Price jobs on profit, not turnover. The profit margin calculator shows what is left after costs.
What are the federal income tax brackets for 2026?
For 2026 the federal rates are 14 percent on the first 58,523 dollars of taxable income, 20.5 percent up to 117,045 dollars, 26 percent up to 181,440 dollars, 29 percent up to 258,482 dollars, and 33 percent above that, before provincial tax is added on top.
The lowest federal rate fell from 15 percent to 14 percent, effective 1 July 2025. The year 2025 was a blended year, and 2026 is the first full year at 14 percent. Any page or template still showing 15 percent for 2026 is stale.
Brackets are marginal: only the income inside a slice is taxed at that slice rate. On top sits the federal Basic Personal Amount, $16,452 for 2026 at lower incomes, phasing down to $14,829 at the top. As a non-refundable credit worth 14 percent of the amount, it takes $2,303.28 off your federal tax.
Watch out: Federal tax is only part of the income tax bill. Your province or territory adds its own tax on the same income, at its own brackets and its own basic personal amount. Never present a federal-only figure as your total tax, and name your province before you treat any estimate as complete.
Quebec is the exception. Quebec residents pay provincial tax to Revenu Quebec on a separate return and contribute to the Quebec Pension Plan (QPP) instead of CPP, so the figures in this guide do not describe a Quebec tax bill.
Worked example: sixty thousand dollars of net income, step by step
Assumptions: Canada, 2026 tax year, $60,000 of net business income after expenses, no other income and no credits except the federal Basic Personal Amount. This simplified example covers federal brackets and CPP only. It excludes provincial tax and the detailed CPP deduction and credit split, so your real bill will differ on both points.
Step 1: CPP first, because it is easy to forget. CPP applies to net business income between the $3,500 basic exemption and the $74,600 first ceiling. ($60,000 – $3,500) x 11.9 percent = $56,500 x 0.119 = $6,723.50. At $60,000 you are below the first ceiling, so no CPP2 applies.
Step 2: federal tax before credits. The first $58,523 is taxed at 14 percent: $58,523 x 0.14 = $8,193.22. The remaining $1,477 is taxed at 20.5 percent: $1,477 x 0.205 = $302.79. Total before credits: $8,193.22 + $302.79 = $8,496.01.
Step 3: take off the Basic Personal Amount credit. $16,452 x 14 percent = $2,303.28. Federal tax after that one credit: $8,496.01 – $2,303.28 = $6,192.73.
Step 4: add the two charges together. $6,192.73 federal tax + $6,723.50 CPP = $12,916.23. That is about 21.5 percent of $60,000, before provincial tax is added. Notice the order of size: at this income, CPP is larger than federal income tax. New freelancers who only budget for income tax are budgeting for the smaller half of the problem.
Here is the same federal and CPP method at three income levels, so you can place yourself before you run your own exact figures. Provincial tax is excluded from every row, for the reason given above.
| Net business income | CPP (and CPP2 where it applies) | Federal tax after Basic Personal Amount credit | Federal tax plus CPP | Share of income |
|---|---|---|---|---|
| $40,000 | $4,343.50 | $3,296.72 | $7,640.22 | 19.1 percent |
| $60,000 | $6,723.50 | $6,192.73 | $12,916.23 | 21.5 percent |
| $80,000 | $8,892.90 | $10,292.73 | $19,185.63 | 24.0 percent |
Check the $80,000 row: CPP reaches its base maximum of $8,460.90, then CPP2 adds ($80,000 – $74,600) x 8 percent = $432, for $8,892.90. Federal tax is $8,193.22 plus $4,402.79 on the next $21,477 at 20.5 percent, less the $2,303.28 credit, giving $10,292.73. CPP stops growing shortly above this level. Income tax does not.
How much CPP do you pay when you are self-employed?
You pay both halves of CPP yourself. For 2026 you pay 11.9 percent on net business income between 3,500 dollars and 74,600 dollars, to a maximum of 8,460.90 dollars, plus 8 percent CPP2 on income between 74,600 dollars and 85,000 dollars, to a further maximum of 832 dollars.
An employee pays 5.95 percent and the employer pays the other 5.95 percent. You are both, so the rate doubles. The first ceiling is the Year’s Maximum Pensionable Earnings (YMPE) of $74,600 for 2026, and the CPP2 ceiling, the Year’s Additional Maximum Pensionable Earnings (YAMPE), is $85,000 (Canada.ca, the Canada Pension Plan enhancement). The maximum total CPP bill is $8,460.90 + $832 = $9,292.90.
CPP is worked out on Schedule 8 and paid with your tax return, not deducted from each invoice. That timing is the trap: the money feels like yours all year, then leaves in one payment.
Tip: Employment Insurance is not a mandatory cost for most self-employed people in Canada. EI for the self-employed is an opt-in programme for special benefits, such as maternity, parental, sickness and caregiving benefits, with its own registration and waiting rules. Do not copy a US-style template that lists EI premiums as a compulsory charge on every freelancer.
If you also have employment income in the same year, CPP on that employment uses some of the same ceiling room, so your self-employed CPP may be lower than the table suggests. Part of your base CPP also earns a credit and the rest is deducted from income, a split the worked example leaves out and says so.
When do you have to register for GST or HST?
You must register when your worldwide taxable supplies pass 30,000 dollars in a single calendar quarter or over four consecutive calendar quarters. Below that limit you are a small supplier, you charge no GST or HST, and you cannot claim input tax credits on your business costs.
This section is a short pointer, on purpose. GST and HST are a separate system, with their own registration and filing rules. The threshold is measured on worldwide taxable supplies before expenses, not on profit (CRA, general information for GST/HST registrants, RC4022). Once registered, you charge the place of supply rate, show your business number on invoices, claim input tax credits (ITCs) on business costs, and remit the difference.
Use LancerBill’s GST calculator to add or remove GST or HST once registered, and build the invoice with the invoice generator, with tax as its own line. For the full province rate table and place of supply rules, read our Canada GST and HST rates guide.
Watch out: Do not charge GST or HST before you are registered, and do not keep charging decisions simple once you cross the limit mid-quarter. In the single quarter case, tax applies to the very supply that takes you over $30,000. Track a rolling four quarter total, not just your calendar year sales, so the crossing does not surprise you.
How much should you set aside, and when are instalments due?
Set aside a separate tax pot from every payment and check the instalment test each year. Our guide works out how much tax a self-employed Canadian should set aside from every dollar of net profit. If your net tax owing is over 3,000 dollars this year and was over that amount in either of the two previous years, the CRA requires quarterly instalments on 15 March, 15 June, 15 September and 15 December.
The 25 to 30 percent set-aside you will see quoted for Canadian freelancers is a practitioner rule of thumb, not a CRA rate. It is a useful starting habit because it has to cover federal tax, provincial tax and CPP together, but your right percentage depends on your province and your income level. Use this decision framework, then replace it with your own calculated figure after your first filed return:
| Your situation | Starting set-aside | Why |
|---|---|---|
| Net income under $40,000, low tax province | 20 percent of every payment | CPP is the larger charge at this level; federal tax is partly shielded by the Basic Personal Amount |
| Net income $40,000 to $80,000 | 25 percent of every payment | Federal tax plus CPP alone took 19 to 24 percent in the table above, before provincial tax |
| Net income over $80,000, or a high tax province | 30 percent of every payment | You are in higher brackets and at or near the CPP maximum; provincial tax adds materially |
| You also have a salary in the same year | Calculate, do not guess | Your salary uses brackets, credits and CPP room, so your freelance income is taxed at your top marginal rate |
Keep GST and HST money out of the tax pot calculation entirely. Tax you collect sits in a third pot of its own, because none of it is available for income tax, CPP or spending.
Instalments are how the CRA collects from people with no withholding. You can pay on the CRA reminder amounts, on the prior year option, or on your own current year estimate if income has changed. Underpaying brings instalment interest. The United States runs a parallel system, compared in our US quarterly estimated taxes guide.
Deadlines are the last trap. You file by 15 June if you or your spouse or common-law partner ran a business, but any balance owing is still due on 30 April. Interest runs from 1 May on an unpaid balance, even though the return itself is not late. Pay an estimate by 30 April if your return is not finished, then file by 15 June.
Key takeaways
- Self-employed Canadians pay federal and provincial income tax on net business income, reported on Form T2125 with the T1 return, plus CPP, plus GST or HST once registered.
- For 2026 the first federal rate is 14 percent on the first $58,523, not 15 percent. Pages still showing 15 percent are stale.
- You pay both halves of CPP: 11.9 percent between $3,500 and $74,600 (maximum $8,460.90), plus 8 percent CPP2 to $85,000 (maximum $832). Total maximum $9,292.90.
- On $60,000 of net income, federal tax after the Basic Personal Amount credit is $6,192.73 and CPP is $6,723.50, totalling $12,916.23 before provincial tax.
- GST/HST registration is mandatory once worldwide taxable supplies pass $30,000 in one quarter or over four consecutive quarters.
- File by 15 June, pay by 30 April. If net tax owing passes $3,000 in the current year and either of the two previous years, quarterly instalments apply.
Frequently asked questions
How much tax do freelancers pay in Canada?
It depends on net income and province. Federal tax and CPP alone took 19.1 percent on $40,000 of net income, 21.5 percent on $60,000 and 24.0 percent on $80,000 in the worked examples in this guide, before provincial tax. Add your province tax on top for a complete figure, and remember GST or HST you collect is not income tax.
What form do self-employed Canadians use to report income?
Form T2125, the Statement of Business or Professional Activities, filed as part of your personal T1 return. It reports your gross business income and your deductible expenses, and the resulting net business income is taxed at personal federal and provincial rates and used for your CPP calculation on Schedule 8.
Do self-employed Canadians have to pay EI?
No, not by default. Employment Insurance for self-employed people is an opt-in programme that gives access to special benefits such as maternity, parental, sickness and caregiving benefits, subject to registration and eligibility rules. Most freelancers owe no EI premiums unless they choose to opt in.
When are self-employed taxes due in Canada?
You file your return by 15 June if you or your spouse or common-law partner carried on a business, but any balance owing is due on 30 April. Interest is charged from 1 May on unpaid balances. If instalments are required, they are due on 15 March, 15 June, 15 September and 15 December.
Is the 25 to 30 percent set-aside a CRA rule?
No. It is a practitioner rule of thumb for covering federal tax, provincial tax and CPP together, not a rate set by the CRA. Your correct set-aside depends on your province and income. Use the framework in this guide as a starting point, then set your own percentage from your first filed return.
Does Quebec use CPP and the same filing system?
No. Quebec uses the Quebec Pension Plan (QPP) instead of CPP, collects its own provincial income tax through Revenu Quebec on a separate return, and has a $1,800 instalment threshold instead of $3,000. Federal tax still applies, with a Quebec abatement. Treat Quebec figures separately from the rest of Canada.
Rates last reviewed: October 2026. This guide is for general information only and is not financial, tax or legal advice.