Your first year self-employed in Canada: the dates and thresholds that matter

The first year of working for yourself is mostly about the work. The tax side is smaller than it looks, but it has a handful of fixed numbers and dates, and missing one of them costs money. This note collects them in one place for a sole proprietor in Canada, with Ontario used where a provincial figure is needed. Every figure comes from a Government of Canada page listed at the end, checked in September 2026.

It is general information, not tax advice. If your situation has any complication, such as a corporation, a partner, employees or income from outside Canada, talk to an accountant.

The four numbers

$30,000: the GST/HST small supplier line. You do not have to register for the GST/HST while your taxable sales stay at or under $30,000 over four consecutive calendar quarters. The count includes associated businesses and worldwide taxable supplies, and it excludes a few items such as sales of capital property and goodwill.

How you cross the line matters:

• If you pass $30,000 within a single calendar quarter, you must charge the tax on the very sale that took you over. Your registration is effective no later than the day of that sale.
• If you pass it over four consecutive quarters but not in any one quarter, you stop being a small supplier at the end of the month after the quarter in which you crossed it. Registration is effective no later than your first sale after that.

Either way, you have 29 days from the effective date to register. In Ontario the harmonized rate is 13 per cent. One exception to know about: taxi and commercial ride-sharing drivers must register from their first fare, whatever their sales.

Registering before you reach $30,000 is allowed if you make taxable supplies. It can make sense when most of your customers are businesses that recover the tax anyway, because a registrant can generally claim back the GST/HST paid on business purchases. Once you register, you charge tax on every taxable sale, so price with that in mind.

$3,500: where Canada Pension Plan contributions start. An employee splits CPP with an employer. A self-employed person pays both halves. For 2026 the combined rate is 11.9 per cent of net self-employment earnings between the $3,500 basic exemption and $74,600, the year's maximum pensionable earnings. The most a self-employed person can pay at that level in 2026 is $8,460.90.

$85,000: the second ceiling. Since 2024 there is a second tier, called CPP2. On earnings between $74,600 and $85,000 in 2026, a self-employed person pays 8 per cent, both halves of the 4 per cent rate, up to $832. There is no exemption at this tier.

CPP is not withheld from self-employment income during the year. It is calculated on your return, on Schedule 8, and it is owed with your income tax. It is easy to overlook in a first year: the bill in April includes a pension contribution that nobody withheld.

$3,000: the instalment trigger. You may have to pay tax in quarterly instalments if your net tax owing is more than $3,000 (in Quebec, $1,800) in the current year and in either of the two previous years. Because the test looks back, someone whose tax was fully withheld at a job in the two previous years is usually not required to pay instalments in the first year of self-employment. It tends to be the second or third year when the CRA's instalment reminders start to arrive.

The five dates

The June 15 filing date is easy to misread as a payment date. It is not. The CRA's calendar for the 2025 tax year lists June 15, 2026 as the filing deadline for self-employed people and April 30, 2026 as the deadline to pay. A balance paid after April 30 collects interest even if the return goes in on time in June.

The form that reports the business

A sole proprietor reports business income and expenses on Form T2125, Statement of Business or Professional Activities, filed with the personal return. It asks for gross income, then expenses by category, and arrives at net income, which is what income tax and CPP are calculated on.

If you work from home, the T2125 has a line for business-use-of-home expenses. The CRA allows the claim only if the workspace meets one of two conditions:

• it is your principal place of business; or
• you use it only to earn business income and you meet clients or customers there on a regular and ongoing basis.

Split the costs on a reasonable basis, such as the workspace's floor area over the home's total area. Renters can claim a share of rent. Owners can claim shares of costs such as mortgage interest and property taxes; capital cost allowance on the home is allowed but has consequences when you sell. The claim cannot create or increase a business loss. Any amount you cannot use this year can be carried forward to a later year.

Records

Keep records and supporting documents for six years from the end of the last tax year they relate to. If you file a return late, the six years run from the day you file it. Destroying them sooner requires the CRA's written permission. The practical version: one folder per tax year, invoices and receipts in it as they happen, and a backup copy somewhere else.

One optional decision: EI special benefits

Self-employed people can opt in to Employment Insurance special benefits, which cover situations such as maternity, parental and sickness leave. It is a real decision rather than a formality:

• your agreement must be active for at least 12 months before you can receive any benefits;
• you must meet a minimum level of net self-employment earnings in the year before you claim;
• you can withdraw at any time unless you have received benefits; after a claim, you pay premiums for as long as you remain self-employed.

A first-year checklist

1. Open a separate bank account for the business so the T2125 is easy to build.
2. Put aside part of every payment for income tax and CPP. The CPP share alone is 11.9 per cent of net earnings above $3,500.
3. Track sales by calendar quarter so you know when you approach $30,000.
4. Write April 30 and June 15 in your calendar now, for next year.
5. Keep receipts and invoices by tax year, for six years.
6. Read the EI self-employed pages before your first year ends, and decide.

Drafted with AI assistance.

Sources

1. Canada Revenue Agency — When to register for and start charging the GST/HST canada.ca
2. Canada Revenue Agency — Charge and collect the tax: which rate to charge canada.ca
3. Canada Revenue Agency — Important dates for individuals canada.ca
4. Canada Revenue Agency — CPP contribution rates, maximums and exemptions canada.ca
5. Canada Revenue Agency — Second additional CPP contribution rates and maximums canada.ca
6. Canada Revenue Agency — Income tax instalments canada.ca
7. Canada Revenue Agency — Business-use-of-home expenses (Form T2125) canada.ca
8. Canada Revenue Agency — Where to keep your records, how long to keep them canada.ca
9. Government of Canada — EI benefits for self-employed people: who can qualify canada.ca
10. Government of Canada — EI benefits for self-employed people: withdrawal from the program canada.ca

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