Canada is set to deliver significant tax relief to nearly 22 million residents, aiming to ease the financial burden on individuals and families starting in mid-2025. Under the new measure, the lowest marginal personal income tax rate will be reduced from 15% to 14%, effective July 1, 2025. For the transition year, the average rate will be 14.5%, followed by a permanent reduction to 14% beginning in 2026.
This tax cut is expected to provide meaningful savings, with two-income families potentially benefiting by up to \$840 annually starting in 2026. Over a five-year period beginning in 2025–26, the total tax savings for middle-income Canadians is estimated to reach around \$27 billion.
The Canada Revenue Agency will adjust its source deduction tables to reflect the mid-year tax rate change. This means that starting in July 2025, employers can reduce the amount of tax withheld from employee paychecks. Those not seeing the change reflected in their pay will benefit when they file their 2025 tax returns in spring 2026.
The majority of the tax savings will go to Canadians earning under \$114,750 annually. Nearly half of the relief will benefit those in the first income bracket—individuals earning \$57,375 or less in 2025. The same reduced rate will also apply to most non-refundable tax credits, ensuring consistent benefits across income levels.
With more than 1.5 million Indians living in Canada and Indian nationals representing a significant share of the nearly 375,000 new citizens welcomed in 2024, this tax relief could be particularly meaningful to immigrant communities working and raising families in the country.
Alongside the personal tax measures, the Canadian government also announced support for industries impacted by ongoing trade tensions with the United States. Several steps have been introduced to alleviate the pressure of U.S. tariffs on Canadian businesses.
A key initiative is a new performance-based remission framework for automakers. This will allow manufacturers that maintain production in Canada to import a limited number of U.S.-assembled vehicles that meet CUSMA requirements, exempting them from Canadian counter-tariffs.
Temporary relief has also been proposed for a six-month period on specific goods imported from the U.S., particularly those used in Canadian manufacturing, food and beverage packaging, and critical sectors like health care, public safety, and national security.
Additionally, the government has opened applications for the Large Enterprise Tariff Loan Facility (LETL), a program aimed at helping large businesses weather the impacts of trade disputes. Priority will be given to enterprises that play vital roles in Canada’s food, energy, and national security landscapes.
