Beginning July 1, 2025, the lowest marginal personal income tax rate for middle-class Canadians will be reduced from 15% to 14%. The maximum tax savings will be $420 per person and $840 per couple in 2026. As a result of this measure, Canadians will save over $27 billion over five years, starting in 2025-26.
Reducing the lowest marginal personal income tax rate from 15 per cent to 14 per cent would reduce taxes for nearly 22 million individual taxpayers, with nearly half of the total tax relief going to those in the first income tax bracket.
The remaining third of tax filers would not owe federal personal income tax, although some of these filers may benefit from the rate reduction in future years if their taxable income increases and they start owing federal tax.
The Canada Revenue Agency will revise its source deduction tables for the July-December 2025 period, allowing pay administrators to reduce tax withholdings beginning July 1.
Every year, income is recorded and taxes are computed. The full-year tax rate for 2025 will be 14.5%, and the full-year rate for 2026 and subsequent tax years will be 14.5%, to reflect a one percentage point reduction in the lowest tax rate that takes effect halfway through the year.
This implies that starting on July 1, anyone who receives employment income and other income that is deductible from their sources may have 14% of their taxes withheld. If not, they will be able to take advantage of this tax break when they submit their 2025 tax returns in the spring of 2026.
Those with taxable earnings under $114,750 in 2025, or those in the two lowest tax brackets, will receive the majority of the tax relief, with roughly half going to those in the first bracket ($57,375 and below in 2025).
The rate applying to most non-refundable tax credits will continue to be the same as the lowest personal income tax rate.
In 2026, nearly 22 million Canadians will receive tax relief, saving two-income households up to $840 annually.
According to estimates, middle-class Canadians will save over $27 billion in taxes over the course of five years, starting in 2025–2026.
In Canada, there are more than 1.5 million Indians. The bulk of the 3,74,832 new citizens who were admitted to Canada in 2024 were Indians.
