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What’s New for the 2026 Tax Season?

Jan 21 2026

CRA Updates for Small Businesses & Contractors 

The 2026 tax season is coming up, and the Canada Revenue Agency (CRA) has announced several updates that will affect small-business owners, contractors, and high-net-worth individuals (HNWIs).  

All data in this guide reflects changes effective for 2026 income and payroll planning, so you can prepare ahead and make informed decisions for the upcoming year. From adjusted tax brackets to changes in capital gains and digital filing requirements, it’s worth understanding the key updates so you can plan effectively. 

We’ve broken down the most important updates to help you make strategic, informed decisions for 2026. Explore our full suite of services if you need tailored support with planning. 

1. Federal Tax Brackets and Basic Personal Amount 

For 2026, the federal government has adjusted tax brackets and the basic personal amount (BPA) for inflation. 

New federal tax brackets: 

  • $0 to $58,523 taxed at 14% 
  • $58,523 to $117,045 taxed at 20.5% 
  • $117,045 to $181,440 taxed at 26% 
  • $181,440 to $258,482 taxed at 29% 
  • $258,482 and above taxed at 33% 

Basic Personal Amount: $16,452 

How this affects you: 

  • Small-business owners and contractors: Lower withholding on salaries means slightly more take-home pay, update payroll systems to reflect the new brackets. 
  • HNWIs: Marginal tax on the first bracket is reduced, consider this when planning income timing or dividend strategies. 

2. Capital Gains and Lifetime Capital Gains Exemption 

Several changes to capital gains could affect both individuals and corporations. 

  • Capital Gains Inclusion Rate: The previously proposed increase from 50 percent to 66.7 percent has been cancelled as of March, meaning the inclusion rate remains at 50 percent for all capital gains. 
  • Lifetime Capital Gains Exemption (LCGE): The LCGE ceiling, which was $1,250,000 in 2025, has been adjusted by inflation.  
  • For 2026, the indexed amount is projected to increase by 2% to $1,275,000 for qualified small business, farm, or fishing property.  

How this affects you: 

  • Small-business owners: Plan sales of shares or assets carefully to maximize LCGE benefits and reduce taxable gains. 
  • Contractors and HNWIs: With the inclusion rate remaining at 50 percent, focus on maximizing exemptions and timing dispositions for overall tax efficiency. We can help you plan with optimal timing. 
  • Corporations: Review capital gains strategies and year-end planning for assets to manage inclusion rates. 

If you’re considering selling shares in the future, understanding your company’s value is key.  

3. CPP, EI and Other Personal Income Adjustments 

  • CPP maximum pensionable earnings (YMPE): $74,600 
  • CPP contribution rates: 5.95% for employer and employee, 11.9% for self-employed 
  • EI contributions: Employees 1.63% up to $1,123.07, employers 2.28% up to $1,572.30, maximum insurable earnings $68,900 

How this affects you: 

  • Self-employed workers will see a slightly higher CPP ceiling, plan contributions accordingly. 
  • Business owners should update payroll deductions for employees and consider year-end contributions for contractors. 

4. Digital Filing and Administrative Updates 

The CRA continues to modernize digital filing for information returns. 

  • Updated XML specifications and schemas for T4, T5 and other returns are effective early January 2026. 
  • Enhanced validation for submissions will ensure correct formatting before acceptance. 
  • Internet filing window: Late December 2025 maintenance, early-mid January 2026 reopen. 

How this affects you: 

  • Small-business owners and contractors using electronic filing must ensure software is updated and compatible. 
  • Avoid delays by submitting early and double-checking validations. 

As you prepare your year-end documents, you can also share files with us safely through our secure upload portal. 

5. Key 2026 Filing Deadlines 

  • Self-employed (T1 filing): June 15, 2026 
  • All taxes owing: April 30, 2026 
  • T4, T5, T4A, & T4FHSA slips: February 28, 2026 

Remember: If you file after April 30 with a balance owing, interest starts immediately. Plan ahead and pay early to avoid surprises. 

6. Planning Ahead 

With these 2026 updates, small-business owners, contractors, and HNWIs should: 

  • Review income and capital gains strategies early. 
  • Update payroll and filing systems for new brackets and CRA requirements. 
  • Consider retirement savings, RRSP and TFSA contributions, and CPP planning. 
  • Consult a tax professional to align your strategy with the latest CRA rules. 

Mowbrey Gil can help you navigate these changes with practical, personalized guidance, from optimizing capital gains and deductions to ensuring compliance with new electronic filing standards. 

Schedule a consultation with our team today to prepare for a smooth and strategic 2026 tax season. 

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