CRA rate changes for 2026: every figure that moved

Overview of 2025 Changes

The Canada Revenue Agency has released the updated tax parameters for the 2025 tax year, reflecting inflation adjustments based on the Consumer Price Index. These changes affect federal income tax brackets, the Basic Personal Amount, Canada Pension Plan contributions including the new CPP2 second ceiling, Employment Insurance premiums, and several provincial tax rates. Every Canadian employee will see the impact of these changes on their paycheque starting in January 2025.

The indexation factor for 2025 is 2.7 percent, which means most thresholds and amounts have been increased by this percentage. While the federal tax rates themselves remain unchanged at 15, 20.5, 26, 29, and 33 percent, the income levels at which each rate applies have shifted upward. This annual adjustment prevents inflation from gradually pushing taxpayers into higher brackets, a phenomenon known as bracket creep.

Federal Tax Bracket Changes

The five federal tax brackets for 2025 are as follows. The 15 percent rate applies to the first $57,375 of taxable income, up from $55,867 in 2024. The 20.5 percent rate applies to income between $57,375 and $114,750. The 26 percent rate covers income from $114,750 to $158,468. The 29 percent rate applies to income between $158,468 and $220,000. Finally, the top rate of 33 percent applies to taxable income above $220,000.

For a typical Canadian earning $75,000 in gross employment income, the bracket adjustment means approximately $200 to $300 less in federal income tax compared to what would have been owed under the 2024 thresholds at the same income level. This is a modest but meaningful improvement that compounds with provincial bracket adjustments.

Basic Personal Amount

The Basic Personal Amount (BPA) for 2025 has increased to $16,129, up from $15,705 in 2024. The BPA represents the amount of income every Canadian can earn without paying any federal income tax. The non-refundable tax credit derived from the BPA is calculated at 15 percent, meaning the actual tax reduction is $2,419 (15 percent of $16,129). For higher-income earners above $173,205, the enhanced BPA is clawed back and reduced to the base amount of $14,156.

CPP and CPP2 Contribution Updates

The Canada Pension Plan has undergone significant changes for 2025. The maximum pensionable earnings (YMPE), which serves as the first ceiling, has increased to $71,300, up from $68,500 in 2024. The employee contribution rate remains at 5.95 percent, resulting in a maximum employee CPP contribution of $4,034.10, calculated as ($71,300 minus the $3,500 basic exemption) times 5.95 percent.

The second additional CPP contribution, known as CPP2, enters its second year in 2025. CPP2 applies to earnings between the first ceiling ($71,300) and the second ceiling (YAMPE) of $79,400. The CPP2 rate is 4 percent for both employee and employer. The maximum CPP2 contribution is $324 per year, calculated as ($79,400 minus $71,300) times 4 percent. For employees earning above $79,400, the combined maximum CPP and CPP2 contribution is $4,358.10.

Quebec employees continue to contribute to the Quebec Pension Plan (QPP) instead of CPP. The QPP employee rate for 2025 is 6.40 percent, resulting in a maximum contribution of $4,341.80. QPP2 mirrors the CPP2 structure with the same ceilings and rates.

Employment Insurance Premium Changes

The EI premium rate for employees outside Quebec has been set at $1.58 per $100 of insurable earnings for 2025, down from $1.64 in 2024. The maximum insurable earnings have increased to $65,700, resulting in a maximum annual employee premium of $1,049.12. Quebec employees pay a reduced EI rate of $1.31 per $100 because the Quebec Parental Insurance Plan (QPIP) covers maternity and parental benefits that EI covers in other provinces.

For employers, the EI premium rate is 1.4 times the employee rate, making the employer rate $2.30 per $100 of insurable earnings outside Quebec. This employer premium is a significant component of the total cost of employment and is factored into our employer cost calculator.

Provincial Tax Changes

Several provinces have also adjusted their tax brackets and credits for 2025. Ontario has indexed its brackets to inflation, with the first bracket threshold increasing to approximately $52,886. British Columbia has similarly adjusted its five brackets, with the first threshold at approximately $47,937. Alberta continues to maintain its single 10 percent flat rate on the first $148,269 of taxable income, with higher rates applying to income above that level.

Quebec, which administers its own income tax system through Revenu Quebec, has indexed its four brackets. The first rate of 14 percent applies to income up to approximately $51,780. New Brunswick, Nova Scotia, and other Atlantic provinces have also made inflation-based adjustments. Workers who moved between provinces during the year should note that their provincial tax is based on their province of residence on December 31, not where they earned their income.

Impact on Your Paycheque

For most employees, payroll deductions are updated automatically by employers at the start of each calendar year. You should see slightly higher net pay on your first 2025 paycheque compared to your last 2024 paycheque at the same gross pay level. The combined effect of higher federal and provincial bracket thresholds, the increased BPA, and adjusted CPP and EI parameters typically adds between $15 and $40 per biweekly paycheque for someone earning between $50,000 and $90,000.

Workers earning above the new CPP2 second ceiling of $79,400 will notice that CPP2 contributions are deducted earlier in the year and then stop once the maximum is reached. This creates a pattern where net pay is lower in the first several months of the year and then increases once both CPP and CPP2 contributions are maxed out.

What You Should Do

Review your first 2025 pay stub to confirm that the updated deduction rates have been applied. If your personal circumstances have changed, such as getting married, having a child, or starting a second job, consider filing a new TD1 form with your employer. Use our salary calculator to estimate your 2025 take-home pay under the updated rates and plan your budget accordingly.