How much tax to set aside when you're self-employed
No one takes tax off a sole proprietor's income, so the whole bill arrives in April. Here's how it's worked out for 2026, and a simple habit that avoids the surprise.
It's income tax plus CPP
Your profit is taxed at federal and provincial rates like any other income. On top of that, you pay both halves of CPP: 11.9% of earnings between $3,500 and $74,600 in 2026, plus 8% between $74,600 and $85,000. Half of the base part becomes a credit and the rest is deducted, which lowers the income tax a little.
A worked example
An Ontario sole proprietor with $60,000 of profit and no other income in 2026 pays about $6,724 of CPP, $5,155 of federal tax, $2,124 of Ontario tax and a $600 Ontario Health Premium. That's about $14,600, or a little under a quarter of the profit.
The habit that works
Each time a client pays you, move a share into a separate savings account. Around 25% to 30% covers most people under $100,000 of profit. Books works out the real figure from your records, so you can see the number and adjust.
Instalments
If you owe more than $3,000 ($1,800 in Quebec) this year and in either of the last two years, the CRA asks for instalments on March 15, June 15, September 15 and December 15. The CRA sends reminders when you need them.
Estimates for 2026 using CRA rates and the basic personal amount only. Your own credits and deductions change the result.