Business · 2026 rules

Self-employment tax

A sole proprietor pays both halves of CPP, gets no EI, and has to remit tax quarterly once the bill passes $3,000. This works out the whole obligation from revenue down, so you know what to hold back before you spend anything.

11.9% CPP on both halves
GST/HST threshold
Instalment schedule

Your numberslive

The business

Gross revenueBefore GST/HST, which is never your income.

Business expensesSoftware, contractors, supplies, professional fees, 50% of meals.

Home office

Annual home costsRent or mortgage interest, utilities, insurance, property tax, internet.

Share used for workWork area divided by total area, adjusted for shared use.12%

0%10%25%50%

Deductions

RRSP contribution

Province or territory

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Set aside for the CRA

$27,331

22.8% of gross revenue — $18,471 of income tax plus $8,860 of CPP

Above $3,000 owing, the CRA requires quarterly instalments of roughly $6,833.

Net business income

$94,640

$120,000 revenue less $25,360 of expenses

Take-home after everything

$67,309

28.9% average rate on business income

Extra CPP versus an employee

$4,430

You pay the employer half too, at 11.9% combined

Every dollar of revenue

Gross revenue, allocated

56%

15%

21%

Yours to keep$67,309
Income tax$18,471
CPP$8,860
Business expenses$25,360

Gross revenue	$120,000
Business expenses	($22,000)
Home office at 12%Claimed on form T2125 — cannot create a business loss	($3,360)
Net business income	$94,640
Federal tax	$12,379
Provincial tax	$6,092
CPP, both halvesHalf of this — $4,430 — is itself deductible	$8,860
EI premiumsNot payable, and no regular benefits either	$0
After-tax income	$67,309

Self-employed versus employed

Total deductions on $94,640, self-employed against an employee

Self-employed$27,331

$8,860 of CPP, no EI

Employee on the same salarybetter$25,175

$4,430 of CPP plus $1,077 of EI

Table view
Self-employed total deductions	$27,331
Employee total deductions	$25,175
DifferenceAlmost entirely the employer half of CPP, partly offset by no EI premiums	$2,157

GST/HST registration

Registration requiredRevenue of $120,000 is over the $30,000 small-supplier threshold	Yes
HST 13% you would chargeCollected on top of your fees and held in trust until remitted	$15,600
Input tax creditsThe sales tax on your own business purchases comes back, which is why voluntary registration often pays	Recoverable
Quick methodRemit a flat share of collected tax instead of tracking every credit	Available under $400k

Obligation as revenue grows

Income tax and CPP owing at several revenue levels

Income tax
CPP

$60,000 revenue$27,367 left after tax and CPP	$7,273
$90,000 revenue$47,703 left after tax and CPP	$16,937
$120,000 revenue$67,309 left after tax and CPP	$27,331
$160,000 revenue$92,975 left after tax and CPP	$41,665
$220,000 revenue$126,039 left after tax and CPP	$68,601

Quarterly instalments are due on the 15thMarch, June, September and December — roughly $6,833 each. Missing them attracts instalment interest even if the balance is paid in full on 30 April, and the interest is not deductible.

The filing deadline is later, the payment deadline is notA self-employed return is due 15 June, but any balance owing is still due 30 April. Filing late without a balance owing costs nothing; paying late costs interest from 1 May.

How this is calculated

Self-employed CPP is 11.9% on pensionable earnings between $3,500 and $71,300, plus 8.0% on the second band to $81,200. Half of the total is deductible from income, and the calculation above applies that deduction before computing tax.

Home office expense is the share of eligible home costs matching the work area. It cannot be used to create or increase a business loss; unused amounts carry forward. The calculation here does not enforce that cap, so a home office larger than your net income will overstate the deduction.

Instalments are shown as a simple quarter of the current year’s obligation. The CRA’s own reminders use a prior-year method that often differs; paying the lesser of the two methods correctly avoids interest.

These results are illustrative estimates based on published 2026 rates and typical lender rules. They are not financial, tax, or legal advice, and they are not a mortgage or credit approval. See the methodology and disclaimer.

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