How is self-employment income taxed in Canada?

Net self-employment income is added to your other income and taxed at the same combined federal and provincial rates as employment income. Each level of government applies its own basic personal amount and progressive brackets, so your total tax depends on both Ottawa and your province.

Why do self-employed Canadians pay more CPP?

An employee pays one half of CPP and the employer pays the other. Self-employed people are both, so they pay both halves — roughly 11.9% of pensionable earnings between the basic exemption and the yearly maximum. Half of that is deductible, but the full contribution is still due.

What is the CPP basic exemption and maximum?

CPP applies only to earnings above a basic exemption (around $3,500) and up to a yearly maximum pensionable earnings cap. Below the exemption no CPP is due; above the cap no additional CPP is charged, so very high earners pay a fixed maximum contribution.

Does this include GST/HST or instalments?

No. GST/HST is a separate sales tax you may need to collect and remit once you pass the small-supplier threshold. The CRA may also require quarterly tax instalments. This tool estimates income tax and CPP on your profit, not sales tax or instalment scheduling.

Is this an exact CRA calculation?

It is a close estimate using federal and provincial brackets, the basic personal amounts, and CPP. It does not handle EI (optional for self-employed), the Quebec QPP/QPIP system precisely, dividend or capital-gains treatment, or every credit. Confirm with the CRA or your accountant.

Canada Self-Employed Tax Calculator

The Canada Self-Employed Tax Calculator estimates what a sole proprietor owes on their net business income: federal tax, provincial tax, and the often-overlooked double CPP contribution. Because a self-employed Canadian is both employee and employer, they pay both halves of the Canada Pension Plan — which is why their effective burden is higher than a salaried worker on the same income.

How it works

Your net self-employment income (revenue minus deductible expenses) is taxed twice — once federally and once provincially — each with its own basic personal amount and progressive brackets:

federal tax     = brackets applied to (income − federal basic amount)
provincial tax  = brackets applied to (income − provincial basic amount)
CPP             = 11.9% × (pensionable earnings − $3,500 exemption), capped at the YMPE
total           = federal + provincial + CPP

The CPP rate of about 11.9% is the combined employee-plus-employer rate, applied to earnings between the basic exemption and the year’s maximum pensionable earnings (YMPE). Above the cap, no further CPP is charged.

Example and notes

A freelancer in Ontario with $70,000 net income pays federal tax on the amount above the federal basic amount across the 15% and 20.5% brackets, plus Ontario provincial tax across its lower brackets. CPP is roughly (min($70,000, YMPE) − $3,500) × 11.9%, a few thousand dollars. Adding the three gives the total, and dividing by income gives the average rate.

Notes: this uses representative federal and provincial brackets and the combined CPP rate. It excludes GST/HST, EI, the precise Quebec QPP system, and many credits. Treat it as a planning estimate and confirm with the CRA or your accountant.