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Sole proprietorship taxes come down to two bills. A sole proprietor pays income tax on the business’s net profit at personal rates, plus both halves of CPP. On $60,000 of profit in Ontario that’s $7,879.42 in income tax and $6,723.50 in CPP, so about $14,603 leaves before you’ve paid yourself anything.
How does a sole proprietorship get taxed?
There’s no separate business tax return. A sole proprietorship and its owner are the same taxpayer. You report the year’s income and expenses on Form T2125, and the net figure flows onto your personal return, where the CRA lists self-employment income on lines 13500 to 14300. That profit lands on top of any other income, like a part-time job or interest.
So a lean year costs you little tax, and a strong year pushes the extra dollars into higher brackets. Nothing gets averaged for you.
What does a sole proprietor pay on $40,000 to $100,000?
Here’s what our self-employed tax calculator gives for an Ontario sole proprietor with no other income and no deductions beyond the business expenses already taken out of the profit.
| Net business income | Income tax | CPP (both halves) | Left after both |
|---|---|---|---|
| $40,000 | $4,221.13 | $4,343.50 | $31,435.37 |
| $60,000 | $7,879.42 | $6,723.50 | $45,397.08 |
| $80,000 | $13,233.57 | $8,892.90 | $57,873.53 |
| $100,000 | $19,044.97 | $9,292.90 | $71,662.13 |
Look at the last two rows. Going from $80,000 to $100,000 adds only about $400 of CPP, because the contribution caps out. The income tax keeps climbing.
Why is CPP such a big part of the bill?
Because you’re both the employee and the employer. For 2026 the CRA shows a maximum self-employed CPP contribution of $8,460.90, based on a $3,500 basic exemption. An employee would pay half of that and have the other half covered by the boss. You don’t have a boss.
Earn above the first ceiling and a second, smaller layer of CPP applies on the next slice of income. That’s the difference between the $8,892.90 at $80,000 and the $9,292.90 at $100,000 in the table.
Those figures are for Ontario. Move the same $60,000 to Alberta and the bill falls to $7,596.03 in income tax plus the same $6,723.50 in CPP. Province matters, but it matters less than people expect.
When do you file and pay?
For the 2025 return the CRA set June 15, 2026 as the filing deadline if you ran a business. Any tax owing was still due April 30, 2026. We couldn’t find the 2026 return dates on an official page yet.
If you owe a fair amount year after year, the CRA may expect instalments. Our tax instalments calculator shows how a yearly bill of $9,000 turns into four payments of $2,250, and the usual test is a net tax owing above $3,000 in the year and in one of the two years before.
Nobody withholds anything from your clients’ payments.
What do people get wrong?
The big one is spending the profit and forgetting the tax. Setting aside a fixed share of every payment is the cheapest habit you can build. In the table above, income tax and CPP together take between 21% and 28% of profit, so setting aside a quarter is a fair starting point.
Next is mixing personal and business spending. The CRA says you can’t deduct personal expenses, and only the business part of a mixed cost goes on the form. A separate bank account makes that sorting far less painful.
Then there’s GST/HST registration, which you may need. The threshold rules are on the CRA’s site, and we haven’t restated them here. The GST/HST calculator handles the maths once you know your rate.
Finally, the calculator is an estimate. It leaves out EI, GST/HST and any credits beyond the basics, so your actual return can differ. For ideas on cutting the bill lawfully, see our guide to sole proprietorship tax deductions.
Where do the numbers come from?
The CPP figures and the filing dates come from the Canada Revenue Agency’s pages, checked on September 30, 2026. Federal and Ontario brackets in the table come from our calculator’s 2026 tax data. This site has no connection with the CRA or any government.
Frequently asked questions
Does a sole proprietorship file a separate tax return?
No. You report the business on Form T2125 and the net result goes on your personal return.
How much CPP does a sole proprietor pay?
You pay both the employee and the employer share. The CRA shows a 2026 maximum of $8,460.90 for the base part.
When is the filing deadline for a sole proprietor?
For the 2025 return it was June 15, 2026, but any tax owing was due April 30, 2026.
Do I pay EI as a sole proprietor?
Not automatically. Self-employed people can opt in for special benefits, and our calculator leaves EI out.
Should I pay tax instalments?
You may need to if your net tax owing is over $3,000 in the year and in one of the two years before. Check the CRA page for your case.
- Self-employed taxes in Canada: income, CPP and GST
How tax works when you are self-employed in Canada: reporting income and expenses, paying both halves of CPP, instalments and when to register for GST
Information only. This page is general information, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns or offer tax services, and we have no connection with the CRA, Revenu Québec, any government or any company named on this page. Check the figures that matter with an official source or a qualified professional.