Self-Employed Tax Guide Canada

Self-employed Canadians — freelancers, consultants, gig workers, and small business owners — face a different tax landscape than employees. You must remit both the employee and employer portions of CPP contributions (11.9% combined for 2026, up to the maximum pensionable earnings). You are also responsible for collecting and remitting GST/HST once your revenue exceeds $30,000 over four consecutive quarters.

The upside is that you can deduct legitimate business expenses against your income, reducing the amount of tax you owe. Common deductions include: home office expenses (proportionate to space used exclusively for business), vehicle expenses for business travel, professional development and subscriptions, accounting and legal fees, advertising, supplies, and a portion of your phone and internet bills. Keep meticulous records and receipts — CRA can audit up to six years back.

Self-employed individuals must pay tax by instalments if their net tax owing exceeds $3,000 in the current year and in either of the two preceding years. Instalments are typically due quarterly (March 15, June 15, September 15, December 15). Missing instalment payments triggers interest charges. Consider setting aside 25-30% of every invoice you collect into a separate savings account for tax payments. For retirement planning, you have no employer pension or RRSP matching — make consistent RRSP or TFSA contributions a non-negotiable business expense.

If your business earns more than approximately $75,000-$100,000 in profit, explore whether incorporating makes sense. A corporation pays a small business tax rate of about 12% (combined federal and provincial) on the first $500,000 of active business income, allowing you to defer personal tax on retained earnings. However, incorporation adds complexity and cost — consult with an accountant.