How Self-Employment Tax Works: Income Tax + CPP
How self-employed income is taxed: income tax plus both halves of CPP, with 2026 examples.
The short version
- Self-employed income is taxed in two layers: ordinary income tax on your net profit, plus both halves of CPP, which an employer would normally split with you.
- For 2026, CPP is 11.9% of net self-employment earnings between $3,500 and $74,600, plus 8% CPP2 from $74,600 to $85,000.
- Part of the CPP is deductible and part is a credit, so the real cost is a bit less than it looks.
- Ontario example, 2026: $60,000 of net profit means about $7,900 of income tax and $6,700 of CPP: about $14,600, or roughly 24% of profit.
- Nothing is withheld. You pay it all by April 30, or by quarterly instalments once your bill passes $3,000 two years running.
How Self-Employment Tax Works: Income Tax + CPP
There's no separate “self-employment tax” in Canada, despite what the American videos say. There's the same income tax everyone pays, plus the Canada Pension Plan, which you pay twice over because you're both the employee and the employer. That second part is the one that surprises people in their first April. Here's how the whole bill is built, and how to see it coming.
For the broader picture (deductions, GST/HST, deadlines), see self-employed taxes in Canada.
Step 1: Net Profit
Start with all your business revenue, including cash, e-transfers and platform payouts. Subtract deductible business expenses. The result, on form T2125, is your net self-employment income. It's added to any other income you have (a T4 job, a pension) and taxed together. Every dollar of legitimate expense you claim lowers both layers of tax.
Step 2: Income Tax on the Total
Your total taxable income runs through the federal and provincial brackets like anyone else's; see Canadian income tax brackets. Your marginal tax rate is what an extra dollar of profit costs.
Step 3: CPP, Both Halves
| 2026 CPP for self-employed people | Rate | Earnings range | Maximum |
|---|---|---|---|
| Base and first enhanced CPP | 11.9% | $3,500 to $74,600 | $8,461 |
| CPP2 (second additional) | 8% | $74,600 to $85,000 | $832 |
An employee pays half of that and the employer pays the other half. You pay all of it. The good news: the employer half and the enhanced parts are deductible from income, and the base employee half gives a credit, so the after-tax cost is lower than the raw number. Quebec is different (QPP).
What It Adds Up To
| Net profit (Ontario, 2026) | Income tax | CPP | Total | Share of profit |
|---|---|---|---|---|
| $40,000 | $4,221 | $4,344 | $8,565 | 21% |
| $60,000 | $7,879 | $6,724 | $14,603 | 24% |
| $90,000 | $16,080 | $9,293 | $25,373 | 28% |
Calculated with our self-employed tax calculator with basic credits only and no other income. Compare: an employee earning $60,000 in Ontario pays about $8,320 in income tax and $3,362 in CPP. The self-employed person pays more CPP but, thanks to the deduction, slightly less income tax.
What will your self-employed tax bill be?
Tell the assistant your expected revenue, expenses, other income and province. It estimates income tax, CPP and instalments, and tells you what to set aside from each payment.
EI Is Optional
Self-employed people don't pay EI unless they opt in, and opting in only covers special benefits (maternity, parental, sickness, caregiving), not regular unemployment. Once you've claimed benefits, you're in for good, as long as you're self-employed.
When You Pay
- File by June 15 (2027 for the 2026 year), but pay by April 30. Interest starts May 1. See paying CRA late.
- Instalments once your net tax owing is over $3,000 this year and in either of the two previous years: March 15, June 15, September 15 and December 15. CPP counts toward that $3,000.
- GST/HST is a separate account and a separate bill if your sales pass $30,000.
Get your GST/HST set up right the first time
The GST/HST SmartFile runs both $30,000 tests on your sales, compares the quick method with the regular method, and fills in form GST74 if the quick method wins.
Rules of Thumb
- Set aside 25% to 30% of every payment (more at higher profits; see how much to save for taxes) in a separate account, plus any GST/HST you collect.
- Claim every legitimate expense; each one cuts income tax and CPP.
- Pay instalments when asked. Instalment interest is avoidable.
- Check the return before you file. Return Check flags missing income from T4A slips and platform reports, and expense claims CRA tends to question.
Self-Employment Tax Questions
How much tax do self-employed people pay in Canada?
Income tax on net profit at normal rates, plus both halves of CPP: 11.9% of net earnings between $3,500 and $74,600 and 8% between $74,600 and $85,000 for 2026. In Ontario, $60,000 of profit means roughly $14,600 in total.
Is there a self-employment tax in Canada?
Not as a separate tax. Self-employed people pay income tax plus the employee and employer shares of CPP contributions.
Is self-employed CPP deductible?
Partly. The employer half and the enhanced contributions are deductible from income; the base employee half gives a non-refundable credit.
Do self-employed people pay EI?
Only if they opt in, and then only for special benefits such as maternity, parental, sickness and caregiving.
When do self-employed people pay their taxes?
The return is due June 15, but any balance is due April 30. Quarterly instalments are required if net tax owing exceeds $3,000 in the current year and either of the two previous years.
Sources: CRA, Business income tax reporting; CPP contribution rates and maximums for 2026; EI special benefits for self-employed people (Service Canada). Examples calculated with our 2026 rules engine. Checked October 2026.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.