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2025 Incoming Tax Alert: Brace Yourself, Canada!

Olu Olu
Jan 2
2 min read

Federal Tax Changes

Employment Insurance Premiums: The Canada Employment Insurance Commission confirmed a hike in EI premiums. Workers will now contribute $1.73 per $100 of insurable earnings (up from $1.66), while employers will pay $2.42 per $100.

Canada Pension Plan (CPP): In 2025, CPP contribution is expanding to comprise 3 parts - base (or original CPP), the first additional component, and the second additional component. As a result, high income employees should expect more payroll taxes.
Carbon Tax Increase: The federal carbon tax rises again, hitting $95 per tonne (up from $80). Expect even higher costs at the pump and on home heating bills.
Alcohol Tax: Booze gets pricier, with a 2% excise duty increase applied to beer, wine, and spirits. Cheers?

Manitoba Tax Updates

Fuel Tax Resumption: The provincial government’s temporary suspension ends in 2025. Drivers will face a 12.5 cents per litre fuel tax, adding a noticeable strain to commutes and business logistics.

Winnipeg Property Taxes

5.95% Property Tax Increase: Winnipeg homeowners will see the largest property tax jump in 34 years, aimed at funding municipal services and infrastructure projects. Budget for bigger bills in the new year.

Capital Gains Tax

In the 2024 budget, the federal government increased the capital gains tax inclusion rate from 50% to 66% for individuals on gains above $250,000 per year. Corporations and trusts will also see their capital gains taxed at the two-thirds rate instead of 50%.

This change, which affects the taxable portion of the profit from selling assets, is being provisionally enforced by the Canada Revenue Agency (CRA) as of June 25, 2024, and will continue until the legislation is passed or repealed. The new rate will be fully implemented in 2025.

Digital Services Tax: What Businesses Need to Know

3% Digital Services Tax: It might interest you to know that your online engagement and user data provide a good basis for governement revenue. In effect since 2024, this tax applies at a rate of 3% on revenue earned from:
- Certain digital services that rely on engagement, data, and content contributions of Canadian users
- Certain sales or licensing of Canadian user data

The Bottom Line

2025 will be an interesting year of varied tax implications for both individuals and businesses alike and these changes will have ripple effects across daily life and the economy. Now’s the time to evaluate budgets, plan for higher expenses, and increase purchasing power.

It is also wise not to get carried away by the ongoing temporary Canada tax break since it will most likely lure many people into increased spending and avoidable debts.

Stay focused and always operate with a holistic budget/plan. Let's help you set up a sustainable plan that works for you today and into the future. Book a free session now!