How Much Tax Will a Sole Proprietor Pay in Canada?

There is no single tax rate for the self-employed, which is exactly what makes this hard to plan for. What you owe is really three separate things stacked together. Once you can see them apart, the number stops being a mystery.

1. Income tax (federal plus provincial)

Your net business income (revenue minus deductible expenses) is added to any other income and taxed at marginal rates. Federal tax applies first. The 2026 federal brackets are 14% up to $58,523, 20.5% to $117,045, 26% to $181,440, 29% to $258,482, and 33% above that. Your province then applies its own brackets on top, which is why two people with the same income in different provinces owe different amounts.

Not all of it is taxed. The federal basic personal amount ($16,452 for 2026, reduced at higher incomes) is a credit that effectively shields the first slice of income from federal tax, and each province has its own basic personal amount as well. To see your actual number after brackets and CPP, use the self-employment tax calculator.

2. CPP or QPP (the part that surprises people)

When you were an employee, you and your employer split CPP. As a sole proprietor you are both, so you pay the whole thing. For 2026 the self-employed base rate is 11.9% on net earnings between the $3,500 basic exemption and $74,600, which works out to a maximum base contribution of $8,460.90. Above $74,600 a second contribution (CPP2) applies at 8% on earnings up to $85,000. Quebec residents pay QPP instead, at 12.6% for 2026.

This is often the biggest shock for someone in their first self-employed year, because it is a real cost on top of income tax that no employer is covering anymore. The good news is that you can deduct part of it on your return, and the self-employment tax calculator builds both halves in.

3. GST/HST (collected, not paid)

GST/HST feels like a tax you pay, but it is really tax you collect from clients and pass on to CRA. It does not come out of your income. You only have to register once your revenue passes $30,000 over four rolling quarters, explained in when you need to register for GST/HST.

Once registered, the one place GST/HST can actually make you money is the Quick Method, where you remit a flat percentage and keep the difference. The Quick Method calculator shows whether it beats the regular method for your business.

When it all comes due, and instalments

Income tax and CPP are settled when you file, by April 30, with self-employed returns due June 15 (though any balance owing is still due April 30). Once your tax owing gets large enough, CRA asks for it in quarterly instalments rather than one lump sum. The tax instalment calculator shows whether instalments apply to you and how much each one is.

Putting a number on it

Adding income tax and CPP together, the 25 to 30 percent set-aside rule is a reasonable first guess for many sole proprietors, but it is only a guess. At lower income the basic personal amounts pull your effective rate down, and at higher income your marginal rate climbs past it. The honest answer is to run your own province and income through a calculator rather than trust a flat percentage.

The tax set-aside calculator turns all of this into a single percentage of each payment to save, and the set-aside guide walks through the math behind it.