You moved to Canada, started freelancing or driving or contracting, and now there’s a tax return to file in a system you’ve never used. Self-employment tax here is more straightforward than it looks, and most of what you need fits on one form.
You’re self-employed the moment you’re paid for work
If you earn money from clients, platforms, or customers (not from an employer who puts you on payroll), the Canada Revenue Agency (CRA) treats you as running a business. You report that income on Form T2125 (Statement of Business or Professional Activities), filed with your personal T1 return. There’s no separate company; it’s all on your personal return as a sole proprietor.
First, the basics newcomers ask about
Your SIN. You need a Social Insurance Number to work and file. If you don’t have one yet, apply through Service Canada. It’s free.
Residency for tax. If you’ve settled in Canada (a home, a life here), you’re generally a tax resident and report your worldwide income from the date you became a resident. Your first-year return is often a part-year return covering the months after you arrived.
Nobody withholds your tax. Unlike a salaried job, self-employment income comes to you in full. The tax is yours to calculate and pay later, which is why you set money aside as you go.
What you’ll actually owe
Two things stack on self-employment income:
Income tax: federal plus your province’s rate, on your net income (after expenses). Your basic personal amount ($16,129 federally for 2025, and it rises yearly) is tax-free, so the first chunk of income isn’t taxed. In the year you arrive, it’s prorated to the days you lived here, so a July arrival gets roughly half.
CPP (Canada Pension Plan): as a self-employed person you pay both halves: 11.9% of net income above $3,500, up to $74,600 for 2026. Above that, CPP2 adds 8% up to $85,000. This surprises newcomers, so plan for it.
A safe habit: set aside 25-30% of everything you earn for income tax and CPP. Keep it in a separate account so it’s there in April.
Deduct your business expenses
You only pay tax on net income. That’s what’s left after legitimate business costs. Common deductions:
| Expense | Notes |
|---|---|
| Home office | A percentage of rent, utilities, and internet if home is your main place of business (or you use the space only for work and meet clients there) |
| Phone & internet | The business-use portion |
| Equipment & tools | Enduring equipment may be deducted over time through the applicable CCA class |
| Vehicle | Business-use portion, with a mileage log |
| Software & subscriptions | Tools you pay for to do the work |
| Supplies & materials | Anything you use up doing the job |
| Professional fees | Accountant, lawyer (insurance goes on its own line, 8690) |
Track these from day one. Every dollar of legitimate expense is a dollar you don’t pay tax on. Our freelance taxes guide walks through the full picture.
GST/HST and the $30,000 line
This is the one rule to remember. Once your revenue passes $30,000 in a single calendar quarter, or over any four consecutive quarters, you must register for GST/HST, charge it on your invoices, and send it to the CRA. Hitting the number in one quarter triggers it immediately, with no grace period. Below $30,000 it’s optional, with one big exception: if you drive for Uber or Lyft (carrying passengers), you must register before your first paid ride. It’s based on revenue, not profit; track your gross earnings and watch the line. See our GST/HST registration guide.
File even if you owe nothing
Newcomers sometimes skip filing because they earned little or think they’re exempt. File anyway. Filing is how you:
- Claim benefits and credits: the Canada Groceries and Essentials Benefit (it replaced the GST/HST credit in July 2026), the Canada Child Benefit if you have kids, provincial credits, and more
- Build RRSP contribution room for the future
- Stay in good standing with the CRA and for immigration purposes
Many benefits are only paid if you file a return, even with low or no income. In your first year, you also apply with Form RC151 (or RC66 if you have kids) so payments can start. After that, filing every year keeps them coming.
The deadlines
| Deadline | What’s due |
|---|---|
| April 30 | Any tax you owe (payment due) |
| June 15 | T1 + T2125 filing deadline (self-employed) |
Self-employed people get until June 15 to file, but if you owe tax it’s due April 30; interest starts May 1 on anything unpaid. File early your first year so you’re not guessing.
Keep it organized from your first invoice
Record every payment, save every receipt, and keep a tax reserve based on your expected income and province. Those records make the first return easier to prepare.
Accountly is built for self-employed Canadians and makes this easy from day one: log income, snap receipts, watch the GST/HST threshold, and get your T2125 totals ready without the year-end scramble. Start free; it takes about five minutes.
Frequently asked questions
I’m new to Canada and freelancing. Do I have to file taxes the first year?
Yes. If you earned self-employment income after becoming a tax resident, you report it on a T2125 with your T1 return. File even if you owe little. It’s how you claim benefits and build RRSP room.
Do I report income I earned before moving to Canada?
Generally you report worldwide income from the date you became a Canadian tax resident. Income earned before arriving is usually outside the Canadian return, but the rules can be specific, so confirm your residency date and situation.
How much tax will I pay as a self-employed newcomer?
It depends on your province and net income, but plan for income tax plus both halves of CPP (11.9% of net income above $3,500, up to $74,600 for 2026, plus 8% CPP2 up to $85,000). Setting aside 25-30% of your earnings is a safe rule for your first year.
When do I need to register for GST/HST?
Once your revenue exceeds $30,000 in a single calendar quarter, or over four consecutive quarters, whichever happens first. It’s based on gross revenue, not profit. Below that, registration is optional, unless you drive for Uber or Lyft: rideshare drivers must register before their first paid ride.
Do I need a SIN to file taxes?
Yes. You need a Social Insurance Number to work and file in Canada. Apply through Service Canada if you don’t have one (it’s free).
What’s the deadline for my first self-employed return?
Self-employed individuals file by June 15, but any tax owing is due April 30. Pay by April 30 to avoid interest, even if you file later.
Official CRA references
Check the CRA’s Form T2125 and business expense guidance against your tax year and circumstances.
The information in this guide is for general informational purposes only and is not intended as accounting, tax, business, or legal advice. Accountly does not provide professional services or act as your accountant, tax advisor, or lawyer. No client relationship is created by your use of this material. Always seek advice from qualified professionals who understand your particular circumstances before acting on any information contained herein.