As 2025 unfolds, businesses in Ontario must remain informed about substantial federal and provincial tax changes that may affect their operations and financial planning. Understanding these modifications is critical to successful compliance and strategic decision-making. Leveraging the right accounting solution can help you navigate these changes more confidently.
Transition to Online Correspondence
Starting in spring 2025, the Canada Revenue Agency (CRA) will use online mail for the majority of its correspondence. Notices and updates will be distributed through the My Business Account rather than conventional paper mail. Businesses should ensure their accounts are active and their email addresses are current to receive timely notifications. Professional accounting services can help you streamline this shift and avoid missing critical updates.
Capital Gains Inclusion Rate Adjustment Deferred
Initially, a rise in the capital gains inclusion rate from one-half to two-thirds was scheduled to take effect on June 25, 2024. However, the federal government has postponed the change until January 1, 2026. Consequently, capital gains realized before this date will continue to be taxed at the existing one-half inclusion rate. If you’re unsure how this affects your bottom line, consult a taxation firm in Ontario to help you assess your position.
Trust Reporting Requirements
Bare trusts won’t need to file a T3 return for the 2024 tax year unless requested by the CRA. However, new reporting rules apply to other types of trusts. Businesses dealing with trust income should seek professional taxation services to ensure they meet all compliance requirements.
Canada Pension Plan Enhancements
In 2025, the Year’s Maximum Pensionable Earnings (YMPE) is set at $71,300, while the Year’s Additional Maximum Pensionable Earnings (YAMPE) is $81,200. Earnings between these thresholds are subject to second additional Canada Pension Plan contributions. This marks the final year of scheduled legislative updates for the CPP enhancement.
Short-Term Rental Compliance
New legislation mandates that short-term rental operators must adhere to local municipal, and provincial regulations to claim tax deductions. Compliance with registration, permit, license, and operating requirements was required by December 31, 2024.
Also Read:The Role of Accounting Solutions in Business Decision-Making
Ontario Combined Tax Rates
For 2025, the combined federal and Ontario corporate income tax rates are as follows:
- General Corporate Income Tax Rate: 26.5%
- Small Business Income Tax Rate: 12.20%
- Investment Income Tax Rate: 50.17%
The Small Business Deduction (SBD) limit is reduced for taxable capital exceeding $10 million and is eliminated at $50 million.
Prescribed Interest Rates
Effective January 1 to March 31, 2025, the prescribed interest rates are:
- Overdue Taxes: 8%
- Non-Corporate Tax Refunds: 6%
- Corporate Tax Refunds: 4%
- Shareholder Loans: 4%
Timely tax installment payments are advisable to avoid accruing non-deductible interest.
Payroll Tax Adjustments
The 2025 Employment Insurance (EI) rate is 1.64% on maximum insurable earnings of $65,700. Canada Pension Plan (CPP) contributions are 5.95% up to $67,800 for CPP1 and 4% up to $81,200 for CPP2. Self-employed individuals contribute at rates of 11.90% and 8%, respectively.
RRSP and TFSA Contribution Limits
The 2025 RRSP contribution limit is 18% of annual salary, up to $32,490, with unused room carryforward. The TFSA annual contribution limit remains at $7,000, which allows the carryforward of unused rooms.
Navigating these tax adjustments may be complicated. Collaborating with a qualified taxation firm in Ontario guarantees compliance and optimised financial plans. At Black Box Consultancy, we provide complete accounting and tax services that are tailored to your specific company needs. Our expertise in Ontario Tax Services positions us to guide you through these updates effectively.