Budget 2025: What You Need to Know.
Hello All,
The Canadian federal budget is usually released in March but was delayed by several months this year, ostensibly due to the election. Many people were waiting with anticipation, but the result itself was somewhat anticlimactic. There aren’t sweeping tax changes or new programs, particularly for individual taxpayers or small business owners, so there isn’t really too much to get excited (or conversely, worried) about.
But, as with every annual budget, it’s useful to understand the more relevant changes.
If You’re an Individual Taxpayer
➡️ The 2025 budget confirms the proposal to reduce the lowest federal income tax rate (announced in May 2025)
Lowest Federal Tax Rate Reduced from 15% to 14.5%
The government plans to reduce the lowest personal income tax rate from 15% to 14.5% in 2025, and then to 14% in 2026 onward.
Applies to taxable income up to $57,375 in 2025 (indexed annually).
This is expected to save most individuals around $200 per year, or about $400 for a two-income family.
⚠️ Note: Because the rate used to calculate most non-refundable tax credits (like the basic personal amount, tuition, and medical credits) will also drop, the overall benefit depends on your situation.
➡️ Elimination of the Underused Housing Tax (UHT)
The UHT will be eliminated starting in 2025. No filing or payment will be required for 2025 or later, but filings are still required for 2022–2024.
➡️ New Tax Credit for Personal Support Workers (PSWs)
A temporary refundable credit will provide eligible PSWs working in healthcare settings 5% of eligible earnings, up to $1,100 per year.
➡️ Automatic Filing for Low-Income Canadians
Starting with 2025 tax returns, the CRA will be able to automatically file returns for certain lower-income Canadians. This should help many of these taxpayers to receive benefits like the GST/HST Credit and Canada Workers Benefit, that they weren't receiving since they weren't filing their returns.
➡️ No More Double Claims for Home-Related Credits
The same expense can no longer be claimed under both the Medical Expense Tax Credit and the Home Accessibility Tax Credit.
➡️ Simplified Registered Plan Rules (Effective 2027)
Rules for RRSPs, TFSAs, and similar plans will be simplified and harmonized, making it easier for these accounts to invest in Canadian small businesses.
➡️(Previously announced) Elimination of the GST for first-time home buyers on new homes up to $1 million and reduction of the GST for first-time home buyers on new homes between $1 million and $1.5 million.
💼 If You Run a Small Business
Most business measures focus on faster write-offs and investment incentives.
➡️ Immediate Write-Off for Computers and Software
Businesses can now deduct the full cost of computers, systems software, and productivity-enhancing assets in the year of purchase.
Applies to assets acquired after Budget Day and first used before 2030.
➡️ 100% Write-Off for Manufacturing or Processing Buildings
Eligible manufacturing or processing facilities can be fully expensed in the first year, rather than depreciated over time.
➡️ Enhanced SR&ED (Research & Development) Credit
The spending limit for the 35% refundable SR&ED credit rises to $6 million, supporting CCPCs investing in innovation.
➡️ Extended Clean Economy Incentives
Full credit rates for Carbon Capture (CCUS) investments are extended to 2035, and more critical minerals now qualify under the Clean Technology Manufacturing credit.
➡️ Lifetime Capital Gains Exemption (LCGE)
The LCGE that was available when you sell shares of a qualifying small business corporation is $1.25 million starting in 2024
➡️ Limits on Tax Deferral in Tiered Structures
New measures aim to limit deferring tax on investment income through groups of corporations with staggered year-ends.
➡️ Phase-Out of the Luxury Tax on Aircraft and Vessels
The luxury tax on certain aircraft and boats will be eliminated, but it remains in place for vehicles.
➡️ Cancellation of the Canadian Entrepreneurs’ Incentive (CEI)
The CEI, which would have reduced capital gains tax on certain small business shares, will not proceed.
If you are interested in the finer points, the size of the deficit and how the government intends to spend taxpayer money, I recommend going to the budget page itself.
Other takes on the budget:
CPA Canada
PWC
Global news (for individuals)
Ronika
