MINISTER of Finance and National Revenue, François-Philippe Champagne, on Wednesday announced one of the first orders of business on the government’s legislative agenda for the new session of Parliament: tax relief for nearly 22 million Canadians, saving two-income families up to $840 a year in 2026.

Once legislated, the lowest marginal personal income tax rate will be reduced from 15 per cent to 14 per cent, effective July 1, 2025.  This measure is expected to deliver over $27 billion in tax savings to Canadians over five years, starting in 2025-26.

Prim Minister Mark Carney said: “Last month, Canadians called for change to bring down the cost of living and to put money back in their pockets. My government will be delivering that change­­—cutting taxes for the middle class and saving families up to $840 a year.”

Champagne said: “With today’s middle class tax cut, we are setting the stage for economic growth by helping hard-working Canadians keep more of their paycheques to spend on the priorities that matter most to them. Every Canadian should be able to afford necessities, feel secure, and get ahead financially—and this tax cut will help them do just that. As Canadians continue to feel the impact of ongoing challenges including trade and tariff uncertainties, they should be able to keep more of what they earn to help build a stronger future and a more resilient Canada.”

Quick Facts:

• Income is reported and tax is calculated on an annual basis. To reflect a one-percentage-point cut in the lowest tax rate coming into effect halfway through the year, the full-year tax rate for 2025 will be 14.5 per cent and the full-year rate for 2026 and future tax years will be 14 per cent. The Canada Revenue Agency will update its source deduction tables for the July to December 2025 period so that pay administrators are able to reduce tax withholdings as of July 1. This means that, effective July 1, individuals with employment income and other income subject to source deductions could have tax withheld at 14 per cent. Otherwise, individuals will realize this tax relief when they file their 2025 tax returns in spring 2026.
• The bulk of tax relief will go to those with incomes in the two lowest tax brackets (i.e., those with taxable income under $114,750 in 2025), including nearly half to those in the first bracket ($57,375 and below in 2025).
• The rate applying to most non-refundable tax credits will continue to be the same as the lowest personal income tax rate.