Going self-employed in Canada changes three things at once: nobody withholds tax for you, CPP doubles, and the CRA starts expecting quarterly payments. None of it is complicated once you see the whole picture — but the first year surprises almost everyone, usually in the form of a five-figure April bill they did not budget for.

Your profit is your salary

As a sole proprietor, the business and you are the same taxpayer. Net business income (revenue minus deductible expenses, reported on form T2125) is added to your personal return and taxed at the same federal and provincial brackets as a salary. There is no separate business tax rate — which is why the decision to incorporate only starts to pay when profits exceed what you need to live on and can genuinely stay inside a corporation.

CPP: both halves, and it is not optional

Employees split CPP with their employer; you are both. In 2026 that is 11.90% of net self-employment earnings between $3,500 and $74,600 (maximum $8,460.90), plus 8% on the CPP2 band between $74,600 and $85,000 (maximum $832). Half of the total is a deduction from income and the rest earns the usual credits, so the net cost is a bit less than the headline — our self-employment estimator models exactly that split. EI, by contrast, is opt-in for the self-employed and covers only special benefits (parental, sickness, caregiving) — you can never collect regular EI on lost contracts, so your emergency fund is your unemployment insurance.

What to set aside: run your own percentage

The practical system: after each month (or each invoice), move a fixed percentage of net income into a separate savings account earmarked for tax. On $70,000 of Ontario net self-employment income in 2026 the full bill is roughly $18,090 — CPP of $7,913.50 plus about $10,175 of income tax after the CPP deduction and credits — a set-aside of about 26%. At $100,000 it climbs to roughly 33%; at $40,000 it falls to about 19%. Recalculate twice a year with the estimator, because CPP maxing out mid-year changes your marginal picture. Then, when the return is filed, pay the balance from that account — and notice the pleasant side-effect: any surplus is a forced-savings bonus you control.

Instalments: the CRA’s standing appointment

Once your net tax owing exceeds $3,000 in the current and either of the two previous years ($1,800 for Quebec residents’ provincial tax), the CRA requires quarterly instalments — March 15, June 15, September 15, December 15 — with interest on late or short payments. The CRA mails (or posts to My Account) instalment reminders suggesting amounts based on last year’s bill; you may pay less if this year’s income is genuinely lower, but the interest clock judges you on the final numbers, so conservative is cheaper.

GST/HST and the paperwork spine

Cross $30,000 of taxable revenue in any four consecutive calendar quarters and registration for GST/HST becomes mandatory — you then charge it, claim input tax credits on expenses, and remit the difference. Many register voluntarily from day one to claim credits and look established. Keep receipts and a mileage log from the start; deductions you cannot document are deductions you will lose in a review. Deadlines to calendar: personal return June 15 (but any balance is due April 30 — the filing extension is not a payment extension), instalments quarterly, GST/HST per your assigned reporting period.