Self-Employment Taxes in Canada

Self-employed Canadians pay: (1) CPP both employee and employer portions (10.5% total vs 5.95% as employee), (2) income tax on net business profit, and (3) HST/GST (13-15% depending on province). Net income is calculated after deducting business expenses.

Key Self-Employment Tax Rules

• CPP contributions: 10.5% on net self-employment income (both portions deductible)
• GST/HST registration: Required if revenue exceeds $30,000 in any 4 consecutive quarters
• Quarterly tax instalments: Required if you owe more than $3,000 combined federal + provincial tax
• Deductible expenses: Home office, equipment, supplies, professional fees, vehicle (50% of actual or use per km allowance)

Tax Planning for Self-Employment

Incorporation vs sole proprietorship depends on income level. Generally, if net business income exceeds $50,000/year, incorporating saves 10-15% on taxes. Deducting all eligible expenses is critical — missed deductions are lost forever.