Last updated: October 22, 2026
If you work for yourself in Canada, nobody deducts tax from your income, nobody remits your Canada Pension Plan contributions for you, and the deadlines work differently from a salaried job. This guide covers how self-employed tax works for the 2026 tax year: who counts as self-employed, what you owe, how to file step by step, the deadlines, the expenses you can claim, and when GST/HST applies. It is written for freelancers, contractors, gig workers and sole proprietors in Toronto, but the rules apply across Canada.
Who counts as self-employed in Canada?
You are self-employed if you earn income from a business you run yourself rather than as someone's employee. For tax purposes that usually means one of three things:
- Sole proprietor: you run an unincorporated business on your own, under your own name or a business name.
- Independent contractor: you provide services to clients under contracts, decide how the work is done and carry the business risk.
- Partner: you share ownership of an unincorporated business with one or more people.
Gig work counts too. If you drive, deliver or sell through an app or online platform, that income is self-employment income. Since 2024, platform operators report their sellers' and gig workers' earnings to the Canada Revenue Agency (CRA) each year, so the CRA can compare what the platform reported with what you file.
If you are paid through payroll with tax deducted, you are an employee for that job, even if you also run a side business. Many people are both, which is covered below.
Do you need to register as self-employed?
You do not register with the CRA simply to be self-employed. You report your business income on your personal tax return. You may need to register for other things, though:
- A business name: in Ontario, if you operate under any name other than your own legal name, you register it through the Ontario Business Registry.
- A Business Number and GST/HST account: once your taxable sales pass the GST/HST threshold (see below), or earlier if you choose to register voluntarily.
- A payroll account: only if you hire employees.
Is there a "self-employment tax" in Canada?
Not as a separate tax. The term comes from the US. In Canada, self-employed people pay two things on their business profit:
- Income tax, at the same federal and Ontario rates as everyone else, on your net business income added to any other income you have.
- Both halves of your CPP contributions. An employee pays half and the employer pays half. When you are self-employed, you pay both.
For 2026, the CPP contribution is 11.9% of your net self-employment earnings between $3,500 and $74,600, up to a maximum of $8,460.90. If you earn more than $74,600, a second contribution of 8% applies to earnings between $74,600 and $85,000, up to $832. Part of what you pay is deductible from your income and the rest gives you a non-refundable tax credit, so the after-tax cost is lower than the headline figure. See the CRA's CPP contribution rates and maximums.
Employment Insurance (EI) works differently. Self-employed people do not pay EI premiums unless they opt in to the EI special benefits program, which covers maternity, parental, sickness, family caregiver and compassionate care benefits. Your agreement must be in place for at least 12 months before you can claim, and once you have received benefits you cannot leave the program: you keep paying premiums for as long as you are self-employed.
How to file your taxes as a self-employed person, step by step
- Gather your records for the year. Sales invoices, platform statements, bank and credit card statements, receipts for business expenses, a vehicle logbook if you drive for business, and any T4A slips from clients.
- Complete Form T2125, Statement of Business or Professional Activities. It records your gross income, your business expenses, capital cost allowance on equipment, the business-use-of-home calculation and your net income. Use a separate T2125 for each business you run. The CRA's guide to completing Form T2125 and Guide T4002 explain each line.
- Carry your net income to your T1 return. Business income goes on line 13500, professional income on line 13700 and commission income on line 13900.
- Calculate CPP on your self-employment earnings. This is done on Schedule 8 and flows into your balance owing.
- File your GST/HST return separately, if you are registered. It is a different return with its own schedule.
- File and pay on time. Most certified tax software handles the T2125 and files electronically. If your return includes several businesses, rental income or US income, it is worth having it prepared by an accountant.
Self-employed tax deadlines for the 2026 tax year
- File your 2026 income tax return: June 15, 2027 (also applies to your spouse or common-law partner)
- Pay any balance owing for 2026: April 30, 2027. Interest starts on May 1
- Quarterly instalments (if required): March 15, June 15, September 15 and December 15
- Annual GST/HST return (individuals with business income and a December 31 year-end): return due June 15, 2027; payment due April 30, 2027
The later filing date does not delay payment. Many self-employed people file in June and are surprised by the interest that has built up since May 1. Late-filing penalties apply on top of interest; see what happens if you file late.
Instalments: the CRA asks you to pay tax in quarterly instalments if your net tax owing is more than $3,000 in the current year and in either of the two previous years. You will usually receive an instalment reminder showing the amounts it suggests.
What business expenses can you deduct?
You can deduct expenses you incur to earn business income, as long as they are reasonable and you can support them with records. The most common:
Home office
You can claim part of your home costs (rent or mortgage interest, utilities, home insurance and property tax) if your workspace is either your principal place of business or used only to earn your business income and on a regular and ongoing basis to meet clients or customers. The claim is based on the share of your home the workspace takes up. Home office expenses cannot create or increase a business loss; any unused amount carries forward to next year.
Vehicle
If you use your car for business, you can claim the business share of fuel, insurance, maintenance, licence fees, lease payments or capital cost allowance, and interest on a car loan. The business share comes from a logbook of business kilometres against total kilometres. Driving from home to a regular place of work is personal, not business, use. The CRA sets annual limits for passenger vehicles, so check the current year's figures before claiming.
Equipment and supplies
Day-to-day supplies, software subscriptions and the business share of your phone and internet are deductible in the year you pay them. Computers, furniture and other equipment are capital assets: you claim them over several years through capital cost allowance (CCA).
Meals and entertainment
Business meals and entertainment are generally 50% deductible. Keep the receipt and a note of who attended and the business purpose. More detail is in our guide to the CRA's meals and entertainment rules.
Travel, professional fees and other costs
Business travel (transport, accommodation and 50% of meals), accounting and legal fees, advertising, business insurance, bank fees on business accounts and professional memberships are also deductible.
GST/HST for self-employed people
You must register for GST/HST once your worldwide taxable sales go over $30,000 in a single calendar quarter or over four consecutive calendar quarters. The CRA explains both tests in When to register for and start charging the GST/HST. Below that, you are a small supplier and registration is optional.
One exception catches many new gig workers: if you drive for a ride-sharing app, you must register for GST/HST from your first fare, regardless of the $30,000 threshold.
Once registered, in Ontario you charge 13% HST on taxable sales, show it on your invoices and remit it to the CRA. You can claim input tax credits for the HST you pay on business expenses. Some small businesses can use the quick method, which simplifies the calculation. Registering voluntarily below the threshold can make sense if your clients are mostly businesses that can claim the HST back, or if you have significant start-up costs. For help registering or filing, see our GST/HST filing service.
Tax planning for the self-employed
Set money aside as you earn
Because no tax is withheld, set aside part of every payment in a separate account to cover income tax, CPP and any HST you have collected. How much depends on your income and expenses. An accountant can work out a realistic percentage for you in your first year.
Use your RRSP
RRSP contributions reduce your taxable income. Your 2026 contribution room is 18% of your 2025 earned income, up to $33,810, plus any unused room from earlier years. Net self-employment income counts as earned income. See the CRA's RRSP limits.
Use your TFSA
The 2026 TFSA limit is $7,000. Contributions are not deductible, but growth and withdrawals are tax-free, which makes it a useful place to hold your tax savings until the bill is due.
Pay family members fairly
If your spouse or children work in the business, you can pay them a wage and deduct it, as long as the amount is reasonable for the work they actually do and you can show it was paid.
Know when incorporating starts to make sense
Once your profit is consistently more than you need to live on, a corporation can defer tax and change how you pay CPP. It also adds cost and paperwork. We compare the two in incorporated vs self-employed.
Common mistakes self-employed people make
- Recording deposits instead of sales. Platforms and payment processors pay you net of fees. Your income is the gross amount, and the fees are an expense.
- Mixing business and personal spending. A separate bank account and card make records far easier to defend. Monthly bookkeeping keeps them current.
- Missing income. Cash, e-transfers and barter are all taxable. Platform reporting means the CRA already knows about app income.
- Claiming home office costs that don't qualify. The space must meet one of the two tests above.
- Forgetting CPP when budgeting. It is often the largest surprise on a first self-employed return.
- Filing in June but paying late. Interest runs from May 1.
If the CRA reviews your return
Self-employed returns are reviewed more often than salaried ones because there are more deductions to check. Organized records are the best protection: invoices, receipts, bank statements, contracts and your vehicle log. If you receive a review or audit letter, respond by the date given. Our guide explains how the CRA selects taxpayers to audit.
How GTA Accounting helps self-employed people
GTA Accounting's self-employed tax services cover the T2125 and personal return, GST/HST registration and filing, instalment planning and year-round bookkeeping, with a CPA reviewing your file. If you are not sure what you owe or whether you should register for HST, book a consultation.
Self-employed tax FAQs
I have a full-time job and a side business. How do I file?
On one return. Your employment income goes on line 10100 from your T4, and your business income goes on a T2125. CPP on the business side is calculated on your self-employment earnings, taking into account what was already deducted at your job.
Can I file my own self-employed tax return?
Yes. Certified tax software handles the T2125. People usually bring in an accountant once they have several income sources, a home office or vehicle claim, GST/HST, or a large balance owing they want to plan for.
I missed the June 15 deadline. What happens?
File as soon as you can. If you owe tax, the CRA charges a late-filing penalty of 5% of the balance owing plus 1% for each full month the return is late, up to 12 months, on top of interest from May 1. If you don't owe anything, there is no penalty, but your benefit and credit payments can be delayed.
When should I think about incorporating?
Usually when your profit is steadily more than you need to take out to live on. Below that point, the cost and paperwork of a corporation generally outweigh the tax deferral.
How long do I need to keep my records?
Generally six years from the end of the last tax year they relate to. That includes receipts, invoices, bank statements and your vehicle logbook.
General information only, not tax advice for your specific situation. Tax rules and figures change; confirm current amounts with the CRA or speak with a professional.