Tax Planning
Preparing for Canada’s 2025/26 Tax Season: Changes Low-Income and Small Business Filers Should Know
Canadian filers should understand the new lowest tax rate cut, automatic benefit filing for low-income individuals, and major changes to support small businesses starting now.
By NomadicTax Research Team • 5-8 min read • March 13, 2026
## Immediate Changes for Individual & Lower-Income Filers
- **Lowest federal income tax rate cut**: As of 1 July 2025, Canada lowered its bottom tax rate from **15% to 14%**. For the 2025 tax year, because the change came mid-year, the rate for amounts taxed at the lowest bracket ends up being **14.5%**. ([canada.ca](https://www.canada.ca/en/department-finance/corporate/transparency/2025/briefing-binder-created-occasion-appearance-standing-committee-on-finance-october-6-2025.html?utm_source=openai))
- **'Automatic Federal Benefits' program**: Beginning with the **2026 tax year**, the CRA will automatically file pre-filled tax returns for many low-income Canadians, helping ensure access to credits such as the Canada Child Benefit or GST/HST Credit. Budget 2025 aims to serve up to 5.5 million people by 2028. ([budget.canada.ca](https://budget.canada.ca/2025/report-rapport/chap3-en.html?utm_source=openai))
## New / Adjusted Small Business and Investment Incentives
- **Flow-through share critical minerals expansion**: Certain crucial minerals—such as germanium, molybdenum, tungsten—are added to those eligible under the critical mineral exploration tax credit (CMETC). Effective for flow-through agreements after 4 November 2025. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/whats-new.html?utm_source=openai))
- **Top-Up Tax Credit**: Introduced for amounts claimed under non-refundable credits above the first income tax bracket threshold, to cushion effects of rate changes. 0.5% in 2025, rising to 1% from 2026 onward. ([canada.ca](https://www.canada.ca/content/dam/fin/publications/taxexp-depfisc/2026/taxexp-depfisc-26-eng.pdf?utm_source=openai))
## Actionable Steps for Canadian Taxpayers
1. **Adjust pay withholding**: Alle income earned after 1 July 2025 should have lower federal taxes; check your employer uses updated tables.
2. **Benefit-eligibility check**: Low-income individuals should ensure the CRA has correct information to make them eligible for auto-filing or programs like Automatic Federal Benefits.
3. **Investment planning**: Investors looking at critical minerals via flow-through shares can plan acquisition timing to ensure eligibility for expanded credits.
4. **Small business/farm operators**: Investigate how Lifetime Capital Gains Exemption (LCGE) now operates; some changes in inclusion rates were **confirmed not proceeding**. ([canada.ca](https://www.canada.ca/en/department-finance/services/publications/federal-tax-expenditures/2026/part-2.html?utm_source=openai))
## Example Scenario
A single Canadian with taxable income in the lowest bracket will see their income taxed at 14% for income earned after 1 July 2025, reducing taxes owed and increasing net pay. An investor investing in a flow-through share issuing germanium will benefit from the expanded CMETC, potentially lowering taxes on mining exploration expenses. A low-income individual, who previously did not file returns because they weren’t required, may receive automatic benefits when their income tax return is pre-filled and submitted by CRA.
## Summary
Canada’s latest tax changes offer **tangible relief for individuals** at lower income levels, boost incentives in resource sectors, and simplify benefit access. Understanding these shifts early helps both personal taxpayers and business owners make informed decisions in the 2025-26 tax year.