Self-Employed Taxes in Canada
Understand income tax, CPP, GST/HST, expenses and filing requirements for self-employed Canadians.
The short version
- Self-employment income goes on your personal return, on form T2125, after business expenses.
- You pay income tax plus both halves of CPP: 11.9% on earnings from $3,500 to $74,600 for 2026, and 8% CPP2 from $74,600 to $85,000.
- Nobody withholds tax for you. Set aside roughly 25% to 35% of profit, more at higher incomes.
- You file by June 15, 2027, but any 2026 balance is due April 30, 2027.
- Over $30,000 in sales in four quarters? You must register for GST/HST.
Self-Employed Taxes in Canada: How It Really Works
The day you start working for yourself, you become your own payroll department. Nobody takes tax off your cheques, nobody pays the employer half of CPP, and nobody reminds you in March. The first April usually makes this very clear.
The good news: you also get to deduct legitimate business expenses before tax is calculated, which employees mostly can't. Run your numbers with the self-employed tax calculator to see what to set aside each month. The full breakdown of income tax plus both halves of CPP is on how self-employment tax works.
Step 1: Report Your Business Income on T2125
Whether you call yourself a sole proprietor, an independent contractor or a freelancer, the tax works the same way. Sole proprietors and partners report revenue and expenses on form T2125, Statement of Business or Professional Activities, which goes with your personal T1 return (see our list of Canadian tax forms). Your net profit is added to your other income and taxed at your normal rates; the brackets are in our 2026 Canadian income tax brackets.
All income counts: cash, e-transfers, PayPal, Stripe and the gig-app payments. CRA receives information from many platforms now, so “they'll never know” is a poor tax strategy (see cash income and taxes). Earning on the side of a job? Start with side hustle taxes (or the guides for online sellers, rideshare and delivery drivers), and if you're not sure it's a business at all, hobby vs business. Not sure you're self-employed at all? See contractor vs employee. Clients who paid you more than $500 may send a T4A with the amount in box 048; it's business income, not wages. See the T4A slip explained.
Step 2: Deduct Your Business Expenses
Expenses that are reasonable and incurred to earn business income are generally deductible (the full list is on business expense deductions; for costs before your first sale, see start-up expenses). The usual ones:
- Supplies, software, phone and internet (the business share).
- Advertising, website and professional fees (accountant, lawyer).
- Vehicle costs, by the business-use percentage from a logbook.
- Business use of home, if your home office is your principal place of business, or you use it only for business and regularly meet clients there.
- Meals and entertainment, generally limited to 50%.
- Equipment and vehicles through capital cost allowance (CCA), spread over several years instead of all at once.
Home-office expenses can't create or increase a business loss; unused home-office amounts carry forward. Our guide to Canadian tax deductions covers the personal side.
Step 3: Pay Both Halves of CPP
As an employee, you pay half the CPP and your employer pays the other half. Self-employed, you pay both: 11.9% of net self-employment earnings between $3,500 and $74,600 for 2026, up to $8,460.90, plus 8% CPP2 on earnings from $74,600 to $85,000, up to $832. Part of it comes back as a deduction and part as a credit, so the real cost is a little lower. ItHalf of the base amount comes back as a deduction and half as a credit. It's still cash you need on April 30.#39;s still cash you need on April 30.
EI is optional. Self-employed people can sign up for EI special benefits (maternity, parental, sickness and others), but not regular EI for lack of work.
How much should you set aside?
Tell the assistant your expected profit, your province and any other income. It runs the self-employed calculator and gives you a monthly number.
Step 4: GST/HST Once You Pass $30,000
When your taxable sales go over $30,000 in a single calendar quarter or over four quarters in a row, you must register for GST/HST and start charging it. Below that, registering is optional and often worth it if your customers are businesses. The rules, the quick method and what happens if you're late are in our guide to the $30,000 GST/HST small supplier rule, the GST/HST guide and how to register.
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.
Step 5: Deadlines and Instalments
- June 15, 2027: filing deadline for your 2026 return if you or your spouse were self-employed.
- April 30, 2027: payment deadline. Interest starts May 1 on anything unpaid.
- Quarterly instalments (March 15, June 15, September 15, December 15) if your net tax owing was over $3,000 this year and in either of the two previous years. CRA sends reminders; see tax instalments for self-employed.
Five Rules of Thumb for the Self-Employed
- Open a separate bank account and move a fixed percentage of every payment into it (how much to save has the numbers). It's CRA's money; you're just holding it.
- Keep receipts and a mileage log as you go. Rebuilding a year of mileage in April is fiction writing, and CRA reads a lot of fiction.
- Track sales by calendar quarter so you see the GST/HST threshold coming.
- Keep records for six years from the end of the tax year they relate to.
- Look at incorporation once profits are well above what you spend. Not before; see corporation vs sole proprietorship. See small business taxes in Canada.
Self-Employed Tax Questions
How much tax do self-employed people pay in Canada?
Income tax at your normal federal and provincial rates on net profit, plus both halves of CPP (11.9% of earnings between $3,500 and $74,600 for 2026, plus 8% CPP2 up to $85,000). Many people set aside 25% to 35% of profit; the self-employed tax calculator gives your own number.
When is the deadline for self-employed taxes?
The 2026 return is due June 15, 2027, but any balance owing must be paid by April 30, 2027 to avoid interest.
Do I have to register for GST/HST as a freelancer?
Once your taxable sales pass $30,000 in one calendar quarter or over four consecutive quarters. Below that it is optional.
Can I deduct my home office if I am self-employed?
Yes, if it is your principal place of business, or you use it only to earn business income and regularly meet clients there. The deduction cannot create or increase a business loss.
Do self-employed people pay EI?
Not automatically. You can opt in to EI special benefits; regular EI for lack of work is not available to the self-employed.
Sources: CRA, T4127 Payroll Deductions Formulas (CPP 2026); Form T2125; When to register for GST/HST. Checked October 2026. The 25% to 35% set-aside is our rule of thumb, not a CRA figure.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.