--- title: "Lowest Federal Tax Rate 2026: 14%, Down From 15%" url: https://www.everstonecpa.com/tax-update/lowest-federal-tax-rate description: "The lowest federal tax rate fell to 14.5% for 2025 and 14% for 2026. See what it saves, and why the credits figured at that rate change along with it." type: tax-update updated: 2026-10-04 summary: "The bottom federal personal income tax bracket fell from 15% to 14.5% for the 2025 tax year, and to 14% for 2026 and later years." faq_count: 4 publisher: EverStone CPA Inc., a Chartered Professional Accountant firm registered with CPA British Columbia and CPA Alberta service_area: British Columbia, Alberta, Ontario and Manitoba language: en-CA contact: info@everstonecpa.com · https://www.everstonecpa.com/book-online --- [Home](https://www.everstonecpa.com/) [Tax updates](https://www.everstonecpa.com/tax-updates) Lowest federal tax rate is now 14% Personal tax # Lowest federal tax rate is now 14% — The lowest federal personal tax rate dropped from 15% to 14% By EverStone CPA · Updated August 2026 The figures on this page, in one view. **Quick answer:** The bottom federal personal income tax bracket fell from 15% to 14.5% for the 2025 tax year, and to 14% for 2026 and later years. **In force** · 14.5% for 2025 · 14% for 2026 onward This measure is law and applies now. ## How it works Canada taxes personal income in brackets. Each rate applies only to income inside its bracket, so someone in the second bracket still pays the first bracket’s rate on their first slice. The lowest federal bracket’s rate dropped from 15% to 14%. Because that bracket is the first one, every taxpayer with income in it benefits, regardless of how much they earn in total. The change also affects non-refundable tax credits. Most are calculated by multiplying a credit amount by the lowest rate, so when the lowest rate falls, those credits are worth slightly less. The net effect for most people is still a reduction in tax. Your marginal rate, the most misunderstood term in personal tax, is the rate on your *next* dollar. Someone “in the 29% bracket” does not pay 29% on everything — only on the part of income in that band, with lower rates on the slices below. That is why a cut to the lowest bracket reaches everyone. Income is taxed in layers, and every taxpayer has income in the bottom layer regardless of how high the top of their income goes. ## How it applies to you Every individual filing a Canadian return with income in the lowest bracket, which is nearly everyone who files. The saving is capped by the size of the bracket, not by your income. A high earner does not save more than someone in the middle — both save the same amount on the same first slice of income. Employers and payroll software apply this automatically through the withholding tables. If your software is current, your net pay already reflects it. **Want a CPA to do your return?** Personal returns start at $125, and self-employed or rental returns are commonly $275–$500, quoted before we start. See [our personal tax service](https://www.everstonecpa.com/personal-taxes), or [get a personal tax quote](https://www.everstonecpa.com/book-online). [Get My Fixed Quote](https://www.everstonecpa.com/book-online) ## How to calculate it To see the effect on your own tax: Calculation steps | Step | Detail | | Take the amount of your income that falls in the lowest bracket | | | Multiply it by the old rate | 15% | | Multiply it by the new rate | 14% | | The difference is your saving | one percentage point of that slice | The cut applies to the first bracket only. Someone earning $40,000 and someone earning $400,000 get the same reduction on the same slice; higher rates are unchanged. ## What changed The reduction took effect 1 July 2025. Because it applied for only half of that year, the CRA applies a blended rate of 14.5% to the 2025 return — 15% for January to June, 14% for July to December — and the full 14% from 2026. ## What to do A one-percentage-point cut to the lowest rate is a modest, universal reduction. It requires nothing from you. If you calculate your own instalments or run payroll manually, use the current rate — a calculation carried over from last year overstates the tax due. Because non-refundable credits are computed at the lowest rate, the headline saving overstates the benefit slightly for people claiming large credit amounts. **The practical point.** Employers should confirm their payroll software is on the current tables. Owner-managers modelling salary versus dividends should rerun the comparison, because the personal side of that calculation moved. A rate change reaches you through your personal return and your payroll withholding; [a personal return prepared by a CPA](https://www.everstonecpa.com/personal-taxes) reconciles the two. ## The terms used on this page Marginal bracket A band of income taxed at a particular rate. The rate applies only to income inside that band. Non-refundable tax credit A credit that reduces tax owing but cannot create a refund on its own. Most are calculated at the lowest federal rate. ## Common questions about lowest federal tax rate is now 14% **What rate applies to my 2025 return?** A blended 14.5%. The reduction took effect 1 July 2025, so it applied for only half of that year — the CRA applies 15% for January to June and 14% for July to December. The full 14% applies from 2026 onward. **Do I benefit if I am a high earner?** Yes, and by the same amount as anyone else. The rate applies to the first bracket only. Someone with $40,000 of income and someone with $400,000 both see the reduction on exactly the same slice, because the rates above that slice have not changed. **Does this change how I should pay myself?** It is worth rerunning. Owner-managers modelling salary against dividends should redo the comparison, because the personal side of that calculation moved while the corporate side did not. **Is there anything an employer needs to do?** Confirm your payroll software is on the current tables. The change is applied through the withholding tables, so an out-of-date table quietly deducts the wrong amount from every cheque. ## Where this comes from Every figure on this page is taken from the source below, not from interpretation: - [CRA — current year tax rates and income brackets](https://www.canada.ca/en/revenue-agency/services/tax/individuals/tax-rates-brackets/current-year.html) **General information, not tax advice.** This page explains a change in general terms. It cannot account for your circumstances and does not create a professional relationship. Confirm anything that affects a decision — [send an enquiry](https://www.everstonecpa.com/book-online). 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Ask free through [the quick-question form](https://www.everstonecpa.com/quick-question); a CPA replies within one business day. Need more? A 45-minute **Advice Call** is $225 plus GST, credited to your first invoice if you become a client within 60 days. Want us to take it on? [Send an enquiry](https://www.everstonecpa.com/book-online). [Ask a Free Question](https://www.everstonecpa.com/quick-question) [Book a Paid Advice Call](https://www.everstonecpa.com/advice-call) Email info@everstonecpa.com ★★★★★ “Personal. Professional. Responsive. Plus he saved me a bundle!” Corrin Skalbeck · Google Local Guide --- Source: https://www.everstonecpa.com/tax-update/lowest-federal-tax-rate Prices: https://www.everstonecpa.com/pricing · Contact: info@everstonecpa.com · https://www.everstonecpa.com/book-online