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Canada Self-Employment Guide

the self-employment in Canada. The self-employed individual (the "sole proprietor" or the "independent contractor") reports the business income on the T2125 (the "Statement of Business or Professional Activities") filed with the T1 General return. The self-employed individual is NOT an employee — the self-employed individual does NOT receive the T4, does NOT contribute to the EI (unless the individual elects the "self-employed EI" for the special benefits), and pays the self-employed CPP at the 11.9% (the 2025 rate — the combined employee and employer shares). The self-employed tax deductions — the business expenses (the "ordinary and necessary" expenses), the vehicle expenses (the business-use percentage), the home office expenses (the workspace-in-the-home), the CCA on the business assets, the meals and the entertainment (50%), the insurance, the professional fees, the advertising, and the supplies. The self-employed tax deadline — the T1 return is due June 15 (the extended deadline for the self-employed), but the balance due is still due April 30. The self-employed GST/HST — the self-employed must register for the GST/HST if the total taxable revenue exceeds the $30,000 small supplier threshold (the 4 consecutive quarters). The self-employed home office — the home office deduction is available if the home is the "principal place of business" or the "exclusive and regular" use for the client meetings.

Self-Employed Tax Deductions

• Business expenses: The advertising, the office supplies, the insurance, the professional fees (the legal, the accounting), the business taxes, the bank charges, the interest on the business loans, the business meals and the entertainment (50% deductible), the repairs and the maintenance, the rent, the utilities, the telephone and the internet, the software and the subscriptions, the travel expenses, and the vehicle expenses.
• Vehicle expenses: The business-use percentage of the vehicle expenses — the fuel, the insurance, the maintenance, the repairs, the leasing costs, the CCA on the vehicle. The CRA requires the "kilometer log" (the tracking of the business and the personal kilometers).
• Home office expenses: The proportional share of the home expenses (the mortgage interest, the property taxes, the insurance, the utilities, the maintenance) if the home office is the "principal place of business" or the "exclusive use" for the client meetings.
• CCA (Capital Cost Allowance): The depreciation on the business assets — the Class 8 (20%) for the equipment, the Class 10 (30%) for the vehicles, the Class 50 (55%) for the computer hardware, the Class 12 (100%) for the software and the tools.

Self-Employed CPP & EI

• Self-employed CPP: The self-employed individual pays 11.9% (the 2025 rate) on the pensionable earnings (the net business income minus the $3,500 exemption). The maximum self-employed CPP contribution is $4,034 (the basic CPP) plus $396 (the CPP2) = $4,430 (the total of the employee and the employer shares).
• Self-employed EI: The self-employed individual is NOT automatically covered by the EI. The individual can elect the "EI for the self-employed" (the "EI special benefits" — the maternity, the parental, the sickness, the compassionate care benefits) by registering with the Service Canada. The election is made by filing the Form SIN50 (the "Application for the EI Benefits for the Self-Employed"). The self-employed EI premium is the same as the employee rate (1.64% for the 2025).
• EI for the fishers: The self-employed fishers are covered by the EI (the "EI for the fishers" — the special EI program for the self-employed fishers). The fisher pays the EI at the fisher's rate (the "EI for the fishers" — the 4.55% of the insurable earnings).

Self-Employed vs Incorporated

• Self-employed (sole proprietor): The simpler structure, the unlimited personal liability, the income taxed at the personal rates, the 11.9% CPP, the optional EI, the business expenses deducted on the T2125.
• Corporation: The limited liability, the income taxed at the corporate rates (the SBD at 9% + the provincial rate), the tax deferral, the dividend integration, the CCPP and the EI (the corporation pays the employer share), the T2 corporate return, and the greater complexity.
• Income threshold: The self-employed structure is generally preferred for the net income below $100,000. The corporation becomes beneficial when the net income exceeds $100,000 (the "tax deferral advantage" — the corporate tax rate is lower than the personal rate).

For the sole proprietorship and the business registration, see our Sole Proprietorship Guide →. For the GST/HST registration and the Quick Method, see our GST/HST Guide →.