The 2025 Canadian federal budget, presented on November 4, 2025, includes significant tax changes for both individuals and businesses. Notable tax proposals include a middle-class tax cut, the elimination of the Underused Housing Tax (UHT) and Luxury Tax on certain items, and changes to the Scientific Research and Experimental Development (SR&ED) program.
Highlights for individuals
The budget proposes several tax changes for individuals:
- The lowest personal income tax rate will decrease from 15% to 14.5% in 2025 and 14% in 2026 and subsequent years, benefiting nearly 22 million Canadians.
- A temporary Top-Up Tax Credit (2025-2030) will be introduced to maintain the 15% rate for certain non-refundable tax credits that exceed the lowest income tax bracket threshold.
- A new temporary refundable tax credit for eligible personal support workers is proposed for 2026-2030. However, personal support workers in B.C., Newfoundland and Labrador, and the Northwest Territories are excluded due to existing agreements.
- Starting in 2026, taxpayers can no longer claim both the Home Accessibility and Medical Expense Tax Credits for the same expense.
- The federal fuel charge was removed in April 2025, and no further Canada Carbon Rebate payments will be made for tax returns filed after October 30, 2026.
- The Digital News Subscription Tax Credit will end in 2025.
Key changes for businesses
Several changes impacting businesses are included in the budget:
- The Underused Housing Tax (UHT) is eliminated from 2025 onward, although requirements for 2022-2024 still apply.
- The Luxury Tax on aircraft over $100,000 and vessels over $250,000 is repealed effective November 5, 2025. The tax on luxury vehicles remains.
- The Scientific Research and Experimental Development (SR&ED) program is enhanced, increasing the enhanced 35% refundable tax credit expenditure limit from $4.5 million to $6 million for taxation years starting on or after December 16, 2024.
- The Canada Revenue Agency will have the discretion to file tax returns for eligible lower-income individuals in simple situations who have not filed.
- Temporary immediate expensing is proposed for eligible manufacturing or processing buildings acquired on or after November 4, 2025, allowing a 100% deduction in the first year under specific conditions.
- Clean energy and technology tax credits are extended or expanded.
The big picture
The 2025 Canadian budget aims to balance tax relief with investments in infrastructure, clean energy, and housing. The budget projects a $78.3 billion deficit for 2025-26 and focuses on targeted spending and economic growth. Measures to reduce costs for Canadians and boost industries, alongside the repeal of certain taxes, also indicate an effort to simplify the tax system and reduce compliance burdens.
