Self-Employment Tax Calculator

Self-Employment Taxes in Canada: CPP, Income Tax, and HST

Self-employed Canadians face a unique tax structure. The most significant difference from employees is the CPP contribution: employees split CPP 50/50 with their employer, but self-employed individuals pay both halves. In 2026, the CPP rate is 5.95% each for employee and employer portions, so self-employed individuals pay 11.9% on pensionable earnings between $3,500 and $74,600. The CPP2 enhancement adds 4% on each portion for earnings between $74,600 and $85,000 — totalling 8% for self-employed. The employer portion you pay — plus the enhanced part of your own half — is deductible from your net income, and the base part of your own half earns a non-refundable credit, partially offsetting the cost. EI is optional for the self-employed; opting in provides access to special benefits (maternity, parental, sickness, compassionate care) but not regular unemployment benefits.

Self-employed individuals report business income on Form T2125 (Statement of Business Activities) attached to their personal tax return. Legitimate business expenses are deducted from gross revenue to arrive at net income, which is then taxed at your regular marginal rate. Common deductible expenses include home office costs (proportional to space used), vehicle expenses (business-use percentage), supplies, professional fees, advertising, insurance, and meals with clients (50% deductible). If your annual revenue exceeds $30,000 over four consecutive quarters, you must register for and collect HST/GST, filing returns quarterly or annually.

Self-Employed vs Employee: Tax Comparison on $100,000 Net Income (Ontario)

Both columns come from the same 2026 engine as the calculator (Ontario tax includes the surtax and Health Premium). The self-employed owe about $979 less income tax because the employer half of CPP and the enhanced part of their own half ($5,773 in all) are deducted from income — yet they still pay $2,544 more in total.

Tax planning is essential for the self-employed. Set aside 25–30% of net income for taxes and CPP throughout the year to avoid a large bill at filing time. CRA requires quarterly instalment payments if your net tax owing exceeds $3,000 in the current year and one of the two prior years. Consider incorporating if your business consistently earns more than you need to live on, as the small business tax rate (approximately 12.2% combined in Ontario) is much lower than personal rates on high income. An accountant familiar with small business taxation can identify deductions you may be missing and help structure your affairs tax-efficiently.