The CRA has rolled out a fresh set of tax changes for 2025, and whether you’re an employee, self-employed, or running payroll, these updates could hit your paycheck and your long-term plans. From adjustments to tax brackets and CPP contributions to a looming capital gains tax hike, these aren’t just minor tweaks. If you earn a paycheck, invest in real estate or stocks, or run a business, here’s what you need to know—and how to stay ahead of the curve.
Federal
For 2025, the CRA has adjusted the federal income tax brackets upward by 2.7% to keep pace with inflation. This helps prevent “bracket creep,” where inflation pushes your income into a higher tax bracket even if your real purchasing power hasn’t increased.
Here’s how the new brackets look:
| Income Range (2025) | Tax Rate |
|---|---|
| Up to $57,375 | 15% |
| $57,376 to $114,750 | 20.5% |
| $114,751 to $177,882 | 26% |
| $177,883 to $253,414 | 29% |
| Over $253,414 | 33% |
The Basic Personal Amount (BPA)—what you can earn tax-free—has increased to a maximum of $16,129. However, higher earners will see that amount phased down to as low as $14,538.
CPP
The Canada Pension Plan is getting another upgrade in 2025. A new second tier of contributions is being introduced to boost retirement income for higher earners.
- YMPE (Year’s Maximum Pensionable Earnings): $71,300
- YAMPE (Year’s Additional Maximum Pensionable Earnings): $81,200
If you earn over $71,300, you’ll now pay an extra 4% on the income between $71,300 and $81,200. If you’re self-employed, you’ll pay double—8%—since you cover both employer and employee shares.
Here’s a quick reference:
| Contributor Type | CPP1 (up to $71,300) | CPP2 ($71,300–$81,200) |
|---|---|---|
| Employee | 5.95% | 4.00% |
| Self-Employed | 11.90% | 8.00% |
This move is designed to provide more retirement income security for middle- and high-income workers.
Provincial
Several provinces are making tax changes of their own. Here’s what’s new:
Manitoba
The Basic Personal Amount will be reduced for people earning between $200,000 and $400,000, disappearing entirely at $400,000. This means higher provincial taxes for top earners.
Nova Scotia
Nova Scotia is finally indexing its tax brackets and credits to inflation. This helps protect residents from tax increases just because of rising wages.
Prince Edward Island
PEI has raised its BPA from $13,500 to $14,250 and adjusted tax brackets for inflation. This provides a bit more room for middle-income households to breathe.
Capital Gains
One of the biggest tax changes is still on the horizon—but it’s worth planning for now.
Effective June 1, 2026, the capital gains inclusion rate will increase from 50% to 66.67% for:
- Individuals with over $250,000 in annual gains
- All capital gains earned by corporations and most trusts
This means if you realize a large gain on investments or property, a larger portion will be taxable starting in mid-2026.
Here’s how the math changes:
| Capital Gains (Annual) | Current Taxable Portion | 2026 Taxable Portion |
|---|---|---|
| Under $250,000 | 50% | 50% |
| Over $250,000 | 50% on first $250K, 66.67% after | 66.67% on entire amount for corps/trusts |
Actions
What should you be doing right now? Here’s a quick checklist:
1. Check Your Pay Stub
If you’re employed, take a look at your June 2025 pay stub. You might notice higher CPP deductions and different tax withholding.
2. Use the CRA Payroll Deductions Calculator
If you’re self-employed or doing payroll, use the CRA PDOC to see accurate payroll impacts.
3. Plan Capital Gains Now
If you expect to realize big gains in 2026, talk to a tax advisor about selling assets before the June 1 deadline—or spreading gains over multiple years to avoid breaching the $250,000 mark.
4. Review Retirement Contributions
With increased CPP benefits on the horizon, review your RRSP and TFSA strategy to balance your future tax exposure.
5. Update Payroll Software
If you manage a business, update your systems to apply new tax rates and CPP formulas starting June 2025.
Tax changes can be complex, but staying informed now means avoiding surprises later. Whether you’re earning a modest salary or managing millions in assets, 2025 is the year to plan smart.
FAQs
What is the new top federal tax rate?
33% for income over $253,414.
When do the new CPP rules start?
CPP changes begin in January 2025.
What is YAMPE in CPP?
It’s the new upper earnings cap—$81,200 for 2025.
Who pays 66.67% capital gains tax?
Individuals over $250K, and all corporations/trusts.
How can I reduce my capital gains tax?
Use RRSPs, TFSAs, or spread gains over years.
