If you're self-employed, freelance, or run a business, you have different tax obligations.
What's different
- No automatic deductions: You must track and pay taxes yourself
- Pay both employee + employer CPP: Total 11.9% (double what employees pay)
- No automatic EI: Can opt in voluntarily
- Quarterly tax payments: Must pay taxes 4 times per year (installments)
- More deductions available: Business expenses reduce your tax
How much to set aside
As a general rule, set aside 25-35% of your income for taxes:
- Federal income tax: 15-33%
- Provincial income tax: 4-25%
- CPP contributions: 11.9%
- Minus: Business expense deductions (20-40% of income typically)
Example: Earn $80,000 as freelancer
- Business expenses: $20,000 (25% of income)
- Taxable income: $60,000
- Total taxes: ~$18,000 (30% of net income)
- Set aside: $1,500/month in separate account for taxes
Business expense deductions
You can deduct any expense that's reasonable and necessary for your business:
- Home office: Rent, utilities, internet, phone (proportional to space used)
- Equipment: Computer, software, tools, furniture
- Vehicle: Gas, insurance, maintenance (if used for business)
- Professional fees: Accounting, legal, website, marketing
- Business meals: 50% deductible if with clients/business purpose
- Travel: Flights, hotels, meals when traveling for business
- Supplies: Office supplies, materials, inventory
- Professional development: Courses, conferences, books
- Insurance: Liability insurance, business insurance
- Bank fees: Business account fees, credit card fees
Keep all receipts and track everything. Good bookkeeping saves you thousands in taxes.
When to pay taxes
If you owe more than $3,000 in taxes, you must make quarterly installment payments:
- March 15
- June 15
- September 15
- December 15
File your tax return by June 15th, but pay any balance owing by April 30th to avoid interest.
GST/HST registration
If you earn over $30,000/year, you must register for and collect GST/HST (sales tax):
- Charge 5-15% tax on invoices (depends on province)
- Remit collected tax to CRA quarterly or annually
- Can claim input tax credits (get back GST/HST you paid on business expenses)
- Usually breaks even or you get money back
⚠️ Self-employed? Get help
Your first year self-employed, hire an accountant ($300-$800). They will:
- Show you how to track income and expenses
- Set up bookkeeping system
- Calculate quarterly payments
- Maximize deductions
- File your taxes correctly
An accountant's fee is tax-deductible, and they typically save you more than they cost.
