Every year brings a handful of changes that quietly alter what you owe and what you can claim. Most of them will not make the news. A few of them will change your numbers. Here is what Ontario business owners should have on their radar for the 2026 filing season.
The small business rate has not moved
The federal small business deduction still applies at 9% on the first $500,000 of active business income for a Canadian-controlled private corporation. Ontario’s small business rate applies on top of that, so your combined rate depends on where the company is resident and how much of your income qualifies.
The number to watch is not the rate — it is the threshold. The $500,000 business limit is shared across associated corporations, and it grinds down as passive investment income rises. If you hold investments inside an operating company, or you and your spouse each own a company that the CRA would consider associated, the limit may be smaller than you assume.
The lowest personal rate came down
The lowest federal personal income tax bracket was reduced from 15% to 14%, effective partway through 2025. Because the change took effect mid-year, the 2025 return is calculated on a blended rate rather than a clean 14%.
This matters more than it looks for owner-managers. If you pay yourself through a mix of salary and dividends, the split that was optimal two years ago may no longer be. It is worth re-running before you set your compensation for the year, not after.
The capital gains exemption keeps rising with inflation
The Lifetime Capital Gains Exemption on qualified small business corporation shares is indexed annually and now sits above $1.25 million. If selling the business is anywhere on your horizon — even five years out — the qualification tests are the thing to look at now, not at closing.
Shares have to meet asset and holding-period tests to qualify. Companies that have accumulated cash or investments over the years often fail the asset test without the owner realising it. Purifying a balance sheet takes time, which is precisely why this is a planning conversation rather than a transaction one.
Vehicle deduction limits went up
The capital cost allowance ceiling for passenger vehicles rose to $38,000 before tax. Lease deduction limits and the prescribed interest cap moved as well.
If you are buying a vehicle through the company this year, the ceiling determines how much of the cost you can actually depreciate — anything above it is simply not deductible. And regardless of the limit, the CRA still expects a mileage log that separates business from personal use. A log reconstructed in April is worth considerably less than one kept as you go.
Reporting rules tightened for trucking
Businesses in the trucking sector now have to report payments for services above $500 in a calendar year made to Canadian-controlled private corporations. Penalties for non-compliance apply from the 2025 tax year onward, with a filing deadline at the end of February.
If you run a trucking operation, or you are an owner-operator paid through a corporation, this is the change most likely to affect you directly.
You will need a backup sign-in method for CRA My Account
From February 2026, CRA online accounts require a backup multi-factor authentication option on file. Without one, you will not be able to sign in.
This is a five-minute task that becomes an urgent problem at exactly the wrong moment — usually the week a filing is due. Set it up now, and make sure whoever handles your books can still get to the account they need.
What we would actually do about it
None of this needs to be handled all at once. In practice, three things are worth doing before year end:
- Re-run your salary and dividend split against the new personal rates.
- Check whether passive income or associated corporations are eating into your $500,000 business limit.
- Get your CRA backup sign-in method in place.
If you are not sure which of these apply to your situation, that is a short conversation rather than a long engagement. Get in touch and we will tell you plainly what is relevant to you and what is not.
This article is general information, not advice for your specific circumstances. Tax figures are indexed and change; confirm current amounts with us or with the CRA before you act on them.