What Is Self-Employment Tax in Canada?
When you work as a freelancer, contractor, or gig worker in Canada, you are considered self-employed by the CRA. Unlike a salaried employee, no taxes are withheld from your paycheques — you are responsible for calculating and remitting your own taxes. This includes federal and provincial income tax, as well as Canada Pension Plan (CPP) contributions. Because you act as both employee and employer, self-employed individuals pay both sides of the CPP contribution — effectively doubling the rate compared to regular employees.
How CPP Contributions Work for the Self-Employed
For 2025, the self-employed CPP contribution rate is 11.9% (5.95% employee + 5.95% employer share) on net earnings between the basic exemption of $3,500 and the Year's Maximum Pensionable Earnings (YMPE) of $71,300. A second tier (CPP2) applies an additional 8% on earnings between $71,300 and $81,200.
Quebec residents pay into the Quebec Pension Plan (QPP) instead, which has a combined self-employed rate of 12.8%. The good news: you can deduct the employer portion of your CPP/QPP contributions on your personal tax return, which partially offsets the cost.
Federal and Provincial Income Tax Brackets (2025)
Canada uses a progressive tax system, meaning only the income within each bracket is taxed at that bracket's rate. For 2025, federal tax rates start at 14.5% (blended, after the government cut the lowest rate to 14% from July 1) on the first $57,375 of taxable income, up to 33% on income over $253,414. Every province and territory adds its own layer of tax on top, with rates and brackets varying significantly by region.
The Basic Personal Amount (BPA) — $16,129 federally in 2025 — is a non-refundable tax credit that effectively means you pay no federal income tax on the first ~$16,129 of income. Each province has its own BPA as well. Alberta introduced a major change in 2025: a new 8% bracket on the first $60,000 of taxable income, providing meaningful tax relief for lower and middle earners.
Common Tax-Deductible Business Expenses
One of the biggest advantages of self-employment is the ability to deduct legitimate business expenses from your gross income before tax is calculated. Common deductible expenses include:
- Home office expenses — a portion of rent, utilities, and internet if you work from home
- Equipment and software — computers, cameras, subscriptions, and tools used for work
- Vehicle expenses — mileage and car costs for business-related travel
- Professional development — courses, books, and certifications relevant to your field
- Advertising and marketing — website hosting, ads, and promotional materials
- Professional fees — accountant, lawyer, and business banking fees
- Phone expenses — the business-use portion of your mobile plan
Always keep receipts and maintain clear records. The CRA may ask you to substantiate any deduction you claim.
How Much Should I Set Aside for Taxes?
A common rule of thumb for Canadian freelancers is to set aside 25–35% of your net income for taxes, depending on your province and total earnings. The higher your income, the higher the percentage you should save, as you move into higher tax brackets.
Consider opening a dedicated savings account for taxes and transferring a set percentage every time you receive payment. This prevents the unpleasant surprise of a large tax bill in April. If your net tax owing exceeds $3,000 in a year, the CRA may require you to pay taxes in quarterly instalments the following year.
GST/HST: Do I Need to Register?
If your gross self-employment revenue exceeds $30,000 in a single calendar quarter or over four consecutive quarters, you are required to register for a GST/HST number with the CRA. Once registered, you must collect GST/HST from your clients and remit it to the CRA.
Note that GST/HST is separate from income tax — it is not a tax on your income, but a tax you collect on behalf of the government. This calculator does not include GST/HST, which you should track separately.
Filing Your Taxes as a Freelancer
Self-employed Canadians must file a T1 General return and complete the T2125 (Statement of Business or Professional Activities) form, which is where you report your gross income and business expenses. The deadline to file is June 15 for self-employed individuals (though any balance owing is still due by April 30 to avoid interest charges).
Tax software like TurboTax, Wealthsimple Tax, or StudioTax can simplify the process. For more complex situations — multiple income streams, significant expenses, or HST obligations — consider working with a CPA or tax advisor.