Good news: Filing taxes as a self-employed person is not very complicated. All that's required is to calculate your self-employed business, professional, or commission income on Form T2125 — Statement of Business or Professional Activities and include that income on your T1 General.
What's more, you can reduce the amount of business income that you've earned, because the Canada Revenue Agency allows the self-employed the opportunity to deduct any relevant business expenses from that income.
This guide walks through who counts as self-employed, how to report and calculate your income, the tax rates and CPP contributions that apply, what you can deduct, and when everything is due.
Who is considered self-employed in Canada?
You're considered self-employed if you earn income by working for yourself rather than for an employer. The Canada Revenue Agency recognizes a few common forms:
Sole proprietor: you run an unincorporated business on your own.
Independent contractor: you provide a service to clients on a contract basis rather than as their employee.
Partner: you carry on a business with one or more other people through a partnership.
Freelancers, consultants, gig workers, and side-business owners usually fall into one of these groups. You can be employed and self-employed in the same year — for example, if you hold a salaried job and take on freelance work on the side.
Business income vs. employment income
Business income includes money earned from a:
profession
trade
manufacturer
an undertaking of any kind, an adventure or concern in the nature of trade, or any other activity you carry on with the intention to earn a profit, provided there is evidence to support that intention
Employment income includes money earned from wages or salaries received from an employer.
Self-employment income reported on Form T4A
Every year around tax time, employers send their employees a T4 slip. This slip makes clear how much an employee earned throughout the previous year, and provides them with the numbers they need to fill out their T1 return.
When you're self-employed or earning business income, you might instead receive a T4A slip — the Statement of Pension, Retirement, Annuity, and Other Income — from your clients by the end of February the following year. T4A slips will include the total dollar amount for each job.
Calculating gross and net self-employment income using Form T2125
As a self-employed person, you must fill out Form T2125, the Statement of Business or Professional Activities. This form helps you calculate your gross income — the total amount of self-employment money you earned during the year. It also lets you deduct allowable expenses from that gross income, which lowers your taxable income so you pay less in income tax.
On Form T2125, you should expect to provide the following details:
your source(s) of business income
description of the business, including a description of your products and services, and the industry that your business operates in
income that comes from internet business activities, including but not limited to affiliate sales, ad traffic revenue and referral fees, including the URL(s) of those sites
any Goods and Services Tax (GST) or Harmonized Sales Tax (HST) you paid and received
any expenses incurred while attempting to earn a profit
After completing Form T2125, you'll then be able to use the net and gross income figures to complete your T1 return.
If you leave $500 or more of income off your return, and you also under-reported by $500 or more in any of the three previous years, you may face a "repeated failure to report income" penalty. It's the lesser of 10% of the unreported amount or 50% of the difference between the tax you understated and any tax already withheld — and a matching provincial or territorial penalty usually applies on top (Quebec charges the federal penalty only).
Self-employed tax rates
Self-employed income is taxed at the same rates as employment income. Federal tax rates for 2026 are:
2026 Federal income tax brackets | 2026 Federal income tax rates |
|---|---|
| $58,523 or less | 14% |
| over $58,5230 to $117,045 | 20.5% |
| over $117,045 to $181,440 | 26% |
| over $181,440 to $258,482 $ | 29% |
| More than $258,482 | 33% |
Provincial/Territorial tax rates can be found on the CRA website.
How much to set aside for taxes
There is no entirely accurate way to determine how much you should set aside during the year to pay your taxes in full upon filing. The general rule is to set aside between 25% and 30% of self-employment income earned, though this may change as your income fluctuates and tax rates shift. That range covers the following:
Canada Pension Plan (CPP)
Federal income tax
Provincial income tax
GST/HST (if registered)
Contributing to the Canada Pension Plan (CPP)
Canadians between the age of 18 to 70 who have net self-employment income and pensionable employment income greater than $3,500 are required to contribute to the CPP. Regular workers contribute a set percentage of their wages above $3,500, up to an annual maximum, while their employer contributes an equal amount. This percentage changes each year — for 2026, it remains at 5.95%.
Self-employed Canadians, however, do not have employers deducting CPP from their pay, then matching that amount and remitting it to the CRA. Instead, they are responsible both for their own portion of CPP and for what would have been their employer's contribution.
For 2026, that means self-employed Canadians should prepare to pay:
11.9% of their income to the CRA, up to a maximum of $8,460.90.
Up to an additional $832 under CPP2, part of the CPP Enhancement that began in 2019 and that added this second contribution beginning in 2024.
GST/HST for self-employed Canadians
Once your business earns more than $30,000 in gross revenue in a single calendar quarter, or over four consecutive calendar quarters, you generally must register for a GST/HST account and start charging tax on what you sell.
After you register, you collect GST/HST from your customers, claim back the tax you paid on business purchases (input tax credits), and remit the difference to the Canada Revenue Agency. How often you file depends on your revenue — monthly, quarterly, or annually. If you earn less than $30,000, registering is optional, though some people choose to so they can claim input tax credits.
Self-employment deductions
To reduce the amount of taxes you owe, it is important to claim all of your business-related expenses on your T2125. In addition to lowering any tax payable, you're also putting together the most accurate picture of your business's overall health. Some of the most common expenses for self-employed Canadians include:
Office supplies: pens, paper, paper clips, printer ink, etc.
Advertising: business cards, flyers, online marketing, etc.
Vehicle expenses: gas, maintenance, insurance, lease payments, repairs, cleanings, oil changes and registration fees may all be deductible if you use your vehicle for the purpose of earning business income. It's important to have your vehicle's mileage figure at the beginning of the year, and at the end of the year, as well as a travel logbook that corresponds to a calendar.
Bank fees (a commonly overlooked deduction)
Inventory: if you purchase products to resell, the cost of those products is a deduction.
Business-use-of-home expenses: if you operate your business out of your home, you may be able to deduct a portion of your household expenses at tax time. This includes a portion of your rent and utilities. Gather your bills and receipts for power, heat, rent, security, hydro, etc. You are only able to deduct the percentage of these expenses that correspond to the percentage of your home that you use solely for earning business income.
Cell phone: if you use your phone for business, a portion of that expense can be claimed as well. Have your cell phone bills on hand.
For the complete list of eligible business expenses, visit the CRA's section on Business Expenses.
How self-employed individuals can file tax online
If this is your first year of self-employment, preparing your first tax return may seem daunting. Fortunately, there are plenty of online tax products that make the self-employed filing process simple. These products can automatically pull any tax slips issued in your name directly from the CRA website, then walk you through completing every step of your return.
To file online, you must be a resident of Canada, and you can't have filed bankruptcy in the current tax year or previous year. To automatically pull your tax slips, you must also be registered with CRA's My Account.
Relevant CRA forms for self-employed individuals
Again, self-employed business income is reported on Form T2125, Statement of Business or Professional Activities. This form helps you calculate your gross and net income, both of which are required when you complete your T1, General income and benefit return. To maximize your deductions and minimize your owed taxes, it's imperative that you keep all of your receipts.
Self-employed tax filing deadlines
Self-employed Canadians get a little more time to file, but not to pay. Personal income tax returns are typically due by midnight on April 30, but if you or your spouse or common-law partner is self-employed, you have until June 15 to submit your return. Any taxes owed are still due by April 30, so it helps to have your return ready by April 30 if you suspect you will owe.
If the CRA determines that you must pay your taxes in installments rather than one lump sum, it will notify you. Installment payments are due on March 15, June 15, September 15, and December 15 every year. If a due date falls on a weekend or public holiday, it moves to the following business day.
