Tax Relief Arrives for Ontario Small Businesses

Owners of small businesses in Ontario will now pay less in taxes.

On July 1, the provincial government reduced the small business tax rate by one per cent, lowering it to 2.2 per cent from 3.2 per cent for the next three years on the first $500,000 of active income.

This reduction follows the 0.3 percentage point cut to the small business income tax rate introduced in 2020.

“Small business owners prefer tax cuts over loans, programs and grants to help them weather today’s economic challenges,” says Joseph Falzata, the Canadian Federation of Independent Business’ (CFIB) Ontario policy analyst. “A tax cut is a direct measure that doesn’t involve doing extra paperwork, searching for programs that rule out most small applicants, hiring extra help with forms or paying interest — actions that stand in the way of small business success.”

The rate cut is expected to benefit more than 375,000 small businesses, with annual savings of up to $5,000.

CFIB reports that businesses plan to direct these savings toward growth initiatives, including increasing employee compensation, expanding their operations and hiring new employees.

“Lower taxes will also help small businesses struggling with economic uncertainty, U.S. tariffs, ever-increasing costs of doing business and low demand,” says Julie Kwiecinski, CFIB’s Ontario director of provincial affairs. “For the past 34 consecutive months, lack of demand has been rated by our Ontario members as the top barrier to their sales or growth. This means that people haven’t been buying enough of their goods and services to allow them to get ahead and stop treading water.”