A self-employed person generally reports business profit on a personal income tax return and pays applicable CPP or QPP contributions. GST/HST is a separate sales-tax obligation, not a flat percentage added to income tax. Start with records of revenue and expenses, then estimate income tax and pension contributions using your full circumstances. CRA: working for yourself.
A practical self-employment tax estimate
Use this worksheet to prepare an estimate; it is not an interactive calculator and does not replace a completed return.
- Add the year’s business revenue and identify allowable business expenses. Compute profit: revenue minus eligible expenses.
- Estimate CPP on pensionable self-employment earnings, taking account of other employment contributions, eligibility and the year’s limits. Quebec residents generally use QPP rules instead.
- Include business income and other income in the personal return. Apply the relevant federal and provincial or territorial rules, deductions and credits.
- Subtract income tax withheld and instalments already paid to estimate the balance. Keep GST/HST collected and any eligible input tax credits in a separate calculation.
Illustration: if business revenue is $80,000 and eligible operating expenses are $30,000, net business income is $50,000 before other tax adjustments. This is not the amount of tax due. If the person is subject to CPP for the full year, has no employment earnings or prior contributions, and has $50,000 of pensionable net earnings in 2026, the first CPP component is ($50,000 − $3,500) × 11.9% = $5,533.50. Income tax is additional; the calculation changes with other earnings, contribution eligibility, deductions and credits. Government of Canada: 2026 CPP amounts.
For 2026 the basic exemption is $3,500 and the first earnings ceiling is $74,600. Self-employed CPP also has a second additional component of 8% on qualifying earnings between $74,600 and $85,000, up to $832. These limits change annually. Do not apply the CPP example to QPP or add a full second exemption when employment and self-employment overlap. CRA: CPP enhancement.
Report business income on Form T2125
A sole proprietor usually completes Form T2125, Statement of Business or Professional Activities, to calculate business or professional income for the T1 return. Reconcile invoices, platform statements and any tax slips with your own records; income is reportable even if no slip arrives. Farming and fishing use different forms. See the CRA self-employed income guide.
Which expenses can reduce profit?
Reasonable current expenses incurred to earn business income can generally be deducted, subject to specific limits. Examples include advertising, office supplies, eligible professional fees and the business share of vehicle costs. Personal expenses are not deductible. If GST/HST on an expense is claimed as an input tax credit, reduce the expense by that credit rather than claiming the same tax twice. Equipment that is capital property is handled under capital cost allowance rules, not automatically expensed like an ordinary subscription. CRA: T2125 expenses.
A home workspace must meet CRA’s conditions: it is your principal place of business, or it is used only to earn business income and regularly to meet clients. Use a reasonable allocation for shared costs; a shared room’s hours of business use also matter. Home-office expenses cannot create or increase a business loss, though an eligible unused amount may be carried forward. CRA: business use of home.
Prepare the full income tax return
This guide’s worksheet and CPP example do not calculate a complete income tax estimate or refund. To work through an annual return, use the CRA income tax package for the income year and applicable province or territory, or choose NETFILE-certified software that supports that year and your return. Check the current certified-year list and the software’s forms, eligibility and cost before starting. As of October 16, 2026, the published NETFILE list covers initial returns for 2018 through 2025; check later for 2026 tax-year availability. Quebec residents generally also file a separate provincial return.
Income tax dates and instalments
For the 2025 tax year, CRA listed June 15, 2026 as the filing deadline when you carried on a business, or your spouse or common-law partner who lived with you at any time during the year carried on a business, provided the business expenditures were not mainly related to a tax-shelter investment. Where the expenditures were mainly related to a tax-shelter investment, the 2025 filing deadline was April 30, 2026. Any balance owing was due April 30 in either case. Both dates have passed; check the CRA’s applicable-year guidance and special circumstances before relying on a later deadline. CRA: 2025 filing dates; CRA: spouse living with you during the year.
Income-tax instalments can be required where net tax owing exceeds $3,000, or $1,800 for Quebec residents, in the current year and either of the two preceding years. CRA provides calculation options and reminders; a reminder alone does not prove instalments are required if the current-year test is not met. CRA: who pays instalments.
GST/HST is a separate calculation
The ordinary $30,000 small-supplier test generally considers relevant worldwide taxable supplies, including zero-rated supplies, of the business and associates. The rules differ if the threshold is exceeded in one quarter or over four quarters, and some activities have special rules. Voluntary registration can be available; eligible registrants may recover input tax credits on qualifying commercial purchases. Review Quebec’s separate QST requirements where applicable. CRA: registration; CRA: input tax credits.
Keep invoices, receipts, a vehicle log where relevant, and records of tax instalments. For a GST/HST return, see the filing guide.
Sources checked October 16, 2026: CRA income, expense, contribution, instalment and GST/HST guidance linked above.