The major changes made to this guide since the last edition are outlined.
This guide reflects some income tax changes recently announced which, if enacted as proposed, would be effective July 1, 2025. At the time of publishing, some of these proposed changes were not law. We recommend that you use the new payroll deductions tables in this guide for withholding starting with the first payroll in July 2025.
Federal legislative updatesOn May 27, 2025, the Government of Canada tabled a Notice of Ways and Means Motion with proposed legislation that reduces the lowest income tax rate from 15% to 14% effective July 1, 2025.
In order to reflect the 1% cut in the lowest tax rate coming into effect halfway through the year, the full-year tax rate for 2025 will be 14.5% which means that a tax rate of 14% will apply for the remaining six months commencing with the first payroll in July. The tax rates and brackets are as follows:
for income under $57,375, the tax rate is 14% (prorated) for income from $57,375 to $114,750, the tax rate is 20.5% for income from $114,750 to $177,882, the tax rate is 26% for income from $177,882 to $253,414, the tax rate is 29% for income of $253,414 and over, the tax rate is 33%.For 2026 and subsequent tax years, the lowest federal tax bracket will be 14%.