Business taxes in Canada: calculator for sole proprietors and companies
Choose a sector, a legal form and a tax system, enter your annual revenue and expenses — the calculator shows every tax and contribution, the total and what you keep.
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Legal forms
Sole proprietor Sole proprietorship
You run the business yourself without a separate legal entity and are personally liable for all its debts. Profit is added to your personal income (form T2125 with your T1 return).
Requirements
If you trade under a name other than your own, register the business name in the Ontario Business Registry: $60 online; renewal $60.
T1 return with form T2125 by 15 June of the following year (15 June 2027 for 2026); the balance owing is due by 30 April; instalments, if required, on 15 March, 15 June, 15 September and 15 December.
GST/HST: once you are no longer a small supplier (over $30,000 of taxable sales in a calendar quarter or over four consecutive quarters), register within 29 days; HST in Ontario is 13%.
CPP contributions for both the employee and employer share are calculated on your T1 return and paid with your tax.
Profit goes on form T2125 with your T1 return. You pay federal tax at 14–33% and Ontario tax at 5.05–13.16% (plus surtax and the Ontario Health Premium), and CPP for both the employee and employer share: 11.9% of earnings between $3,500 and $74,600 and CPP2 of 8% up to $85,000. Half of the base contributions gives a credit; the rest is deducted from income.
Conditions
GST/HST: you must register once taxable supplies exceed $30,000 in a calendar quarter or over the last four quarters (small supplier rule); not included in the calculation.
Employment Insurance is not mandatory for the self-employed and is not included; the LIFT credit and the Canada employment amount do not apply, as they are only for employment income.
A separate legal entity; as a shareholder you risk only what you invested. A private corporation controlled by Canadian residents (CCPC) pays a reduced rate on the first $500,000 of active business income (small business deduction).
Requirements
Incorporate in the Ontario Business Registry: $300 online; the annual return to Ontario is free.
T2 return within 6 months after the tax year ends; tax is due 2 months after year end (3 months for a CCPC claiming the small business deduction, if CRA conditions are met).
GST/HST under the same small supplier rule ($30,000); HST in Ontario is 13%.
If without the corporation you would be your client's employee (personal services business): no small business deduction or general rate reduction, limited expenses, and an additional 5% federal tax.
The corporation pays, on active business income up to $500,000, 9% federal (small business deduction) and Ontario 3.2% until 30 June 2026 and 2.2% from 1 July 2026 (prorated by days for a calendar year); above $500,000 it pays 15% and 11.5%. Dividends from this income are non-eligible: grossed up by 15%, then reduced by the federal credit (9/13 of the gross-up) and the Ontario credit (2.9863%).
Conditions
GST/HST: you must register once taxable supplies exceed $30,000 in a calendar quarter or over the last four quarters (small supplier rule); not included in the calculation.
If without the corporation you would be your client's employee (an "incorporated employee"), it is a personal services business: no small business deduction and a higher rate.
The $500,000 limit is shared among associated corporations; Ontario's small business rate is phased out for taxable capital between $10 million and $50 million.
From profit above $500,000 the corporation can pay eligible dividends (72% of that profit, GRIP): 38% gross-up, federal credit 6/11 of the gross-up, Ontario credit 10%.
Manufacturing and processing: Ontario's rate on income above $500,000 is 10% instead of 11.5% (Ontario manufacturing and processing tax credit); the federal rate stays 15% and the small business rates do not change.
Software development, IT services, consulting for companies and entrepreneurs.
Personal services business risk: if you work for one client the way their employee would, the corporation loses the small business deduction, pays full federal and Ontario rates and an additional 5% federal tax. The calculator assumes it is not a PSB.
13% HST in Ontario on most services once you pass the $30,000 small supplier threshold (in a calendar quarter or over four consecutive quarters).
A sole proprietor pays the same tax and CPP rates in every sector; only the Ontario rate of a manufacturing corporation depends on the sector.
Other business services draft — data being checked
Marketing, design, translation, engineering, bookkeeping and other professional services to companies.
Corporate rates are the same as for IT: 9% federal + 3.2% / 2.2% Ontario up to $500,000, then 15% + 11.5%. The personal services business rule covers any services you provide to one client like an employee.
13% HST in Ontario on most services once you pass the $30,000 small supplier threshold (in a calendar quarter or over four consecutive quarters).
Services to individuals draft — data being checked
Household services, repairs, beauty, tutoring, photography — for private customers.
Some services to individuals are exempt from GST/HST: music lessons, tutoring in a course that follows a curriculum, child care, most health services of licensed physicians and dentists — no HST is charged and HST on your costs is not recovered.
Other services (beauty, repairs, photography) are taxable: 13% HST in Ontario after the $30,000 threshold.
The personal services business rule concerns working for one client as a de facto employee; serving many private customers usually does not fall under it.
Trade in goods draft — data being checked
Retail and wholesale, including an online shop (excluding excise goods).
Most goods carry 13% HST in Ontario; basic groceries such as milk, bread and vegetables are zero-rated (0%).
The small supplier threshold is the same — $30,000 of taxable sales in a calendar quarter or over four consecutive quarters; after that, register within 29 days.
Profit from selling goods is active business income: the small business deduction applies; Ontario's manufacturing credit does not cover resale.
Manufacturing draft — data being checked
Making and selling your own products: food, furniture, clothing, handmade goods.
Ontario's manufacturing and processing tax credit cuts Ontario's rate on corporate income above the $500,000 limit from 11.5% to 10%. The federal rate is 15% (reduced only for zero-emission technology manufacturers). The calculator applies 10% to all profit above $500,000.
Food products that are basic groceries are zero-rated for GST/HST; other products carry 13% HST in Ontario after the $30,000 threshold.
Assumptions
One owner, tax resident of this country, no employees, no children, no other income; the business runs for the whole year.
Lives in Ontario; only the basic personal amount; the corporation's tax year is calendar 2026, so Ontario's small business rate is prorated: 181 days at 3.2% and 184 days at 2.2% (≈2.70%).
Corporation: all profit is active business income (not a personal services business), no associated corporations, taxable capital under $10 million; dividends from profit within $500,000 are non-eligible, from profit above it eligible up to 72%.
Company: the owner is the sole shareholder and director and takes no salary; profit after corporate tax is either paid out in full as dividends in the same year or kept in the company.
Expenses are documented business costs fully deductible in the year they are incurred; depreciation rules, prior-year losses and voluntary pension contributions are not modelled.
VAT (or GST/HST) and sales taxes are not included: they are passed on to clients and do not reduce profit.
Manufacturing: all corporate profit above $500,000 is Canadian manufacturing and processing profit (Ontario rate 10%); other sectors 11.5%.
DoubleTaxation