Wealth Strategies: Canada Budget 2025 Overview

On November 4, 2025, Minister of Finance and National Revenue François-Philippe Champagne delivered the federal budget, titled "Building Canada Strong," amid moderately slower economic growth, global trade frictions, and geopolitical unpredictability. The policy agenda aims to strengthen, safeguard, and empower Canadians by investing in areas such as housing, infrastructure, national defense, productivity, and economic competitiveness. At the same time, a Comprehensive Expenditure Review is projected to generate $60 billion in savings and new revenues over five years. A new Capital Budgeting Framework has also been introduced to distinguish long-term capital expenditures from everyday operating costs. 

Budget projections set the 2025-2026 federal deficit at $78.3 billion, which is anticipated to fall to $56.6 billion by 2029-2030. Two main fiscal anchors are set: to align ongoing operational expenditures with revenues by 2028-2029 and to ensure a decreasing ratio of deficit-to-GDP. 

From a personal and small business tax standpoint, the focus of this summary, there are no planned changes to the main personal (besides the previously announced personal marginal tax cut detailed below) or corporate income tax rates, capital gains inclusion rules, or other broad-based tax regulations. For individuals, in addition to the already announced five-year refundable Tax Credit for Personal Support Workers and an automatic tax filing option for seniors and low-income groups, several proposals aim to increase the system’s fairness and integrity. No changes are put forward for the Registered Retirement Income Fund (RRIF) minimum withdrawal calculations. Business-related measures expand clean energy tax relief and tighten rules on tiered corporate structures benefiting from refundable investment income taxes. 

Personal Tax Measures 

• A temporary Personal Support Workers Tax Credit will be introduced, giving eligible workers at authorized health-care institutions a refundable tax credit worth 5% of qualified earnings (up to $1,100 annually), valid from 2026 to 2030. 
• Starting in 2025, the CRA will gain discretionary powers to file tax returns on behalf of certain individuals (excluding trusts) to ensure they access income-tested benefits like the GST/HST Credit, Canada Child Benefit, and Canada Workers Benefit. 
• The middle-class tax cut, announced in May 2025 and progressing through Bill C-4, will lower the first marginal personal tax rate and related non-refundable tax credit rates from 15% to 14.5% in 2025 and to 14% from 2026 onward. To ensure no one pays more tax due to this change, a new non-refundable Top-Up Tax Credit will apply for the 2025–2030 years, holding non-refundable tax credits above the first bracket at the former 15% rate. 
• From 2026, expenses eligible for the Medical Expense Tax Credit cannot also be claimed for the Home Accessibility Tax Credit. 
• For recipients of the Canada Disability Benefit, a one-time supplemental payment of $150 will be introduced per Disability Tax Credit (DTC) certification or recertification, retroactive to the program’s launch. Legislation is also planned to exempt this benefit from taxable income. 
• The Canadian Carbon Rebate (CCR), previously returning federal fuel charge proceeds to eligible residents, will cease for tax returns or adjustments filed after October 30, 2026, following the April 1, 2025, removal of the federal fuel charge.​ 

 

Qualified Investments for Registered Plans 

Significant simplification and harmonization are proposed for rules governing qualified investments under vehicles such as RRSPs and TFSAs. These changes, effective in 2027, will streamline requirements for small business investment and replace the existing regime with new categories of eligible investments.​ 

Trusts and the “21-year rule” 

Personal trusts are currently deemed to dispose of their holdings at fair market value on each 21st anniversary, a mechanism designed to prevent indefinite tax deferral. If property moves tax-deferred from one trust to another, a rule ensures the new trust inherits the original trust’s 21-year timeline. To close loopholes, new rules will expand anti-avoidance measures to include indirect transfers (such as to a beneficiary corporation held by a new trust), effective for transfers after November 4, 2025.​ 

Business Tax Measures 

Clean Technology 

• Additional critical minerals—antimony, indium, gallium, germanium, and scandium—are now eligible for the Clean Technology Manufacturing investment tax credit for equipment acquired after November 4, 2025. 
• The full credit rates for the Carbon Capture, Utilization and Storage (CCUS) investment tax credit will be extended by five years for use between 2031 and 2035.​ 

 

Immediate Expensing 

Temporary immediate expensing will be provided for eligible manufacturing and processing building costs, including improvements. A 100% deduction can be claimed in the first year of use (if at least 90% of the floor space is for manufacturing/processing).​ 

Scientific Research and Experimental Development (SR&ED) 

• The SR&ED enhanced 35% tax credit will have higher taxable capital phase-out thresholds. 
• The annual expenditure cap for the enhanced credit rises to $6 million, effective for tax years beginning after December 16, 2024. 
• The enhanced credit is extended to eligible Canadian public corporations, and eligibility for SR&ED capital expenditures is reinstated. 
• The CRA will launch consultations on additional SR&ED program improvements, including an overhaul of Form T661.​ 

 

Tax Deferral via Tiered Corporate Structures 

The government will act to limit the deferral of refundable taxes on investment income achieved through staggered-year-end, tiered corporate structures, with changes applying to tax years starting after November 4, 2025.​ 

Other Notable Measures 

Underused Housing Tax (UHT) 

The UHT, which began in 2022 and affected certain non-resident/non-Canadian owners of vacant or underused properties, will be eliminated starting in the 2025 calendar year. No UHT payments or returns will be required for 2025 and beyond; requirements for 2022–2024 remain in force.​ 

GST for First-Time Home Buyers 

The budget confirms that GST will be eliminated for first-time home buyers on new homes valued up to $1 million and reduced for homes in the $1–1.5 million range.​ 

Luxury Tax Amendments 

The Select Luxury Items Tax Act will be amended to remove the luxury tax on aircraft and vessels. Taxes on qualifying vehicles and boats will cease for transactions after November 4, 2025.​ 

Transfer Pricing Overhaul 

The government intends to introduce new legislation to update and protect Canada’s transfer pricing rules, addressing profit allocation among multinationals.​ 

Updates to Previously Announced Measures 

• The reporting obligations for bare trusts will now begin with tax years ending after December 31, 2026. 
• The August 12, 2024, alternative minimum tax (AMT) proposals proceed, excluding certain changes for resource expenses. 
• The proposed increase to the lifetime capital gains exemption (to $1.25 million, as announced in Budget 2024) remains on track. 
• The Canada Entrepreneurs’ Incentive will not be implemented. 
• The government repeats its commitment to pursue technical amendments for clarity and system integrity.​ 

 

Professional Advice Recommendation 

Taxpayers are encouraged to consult with tax, legal, or financial professionals before acting on any proposed budget measures. While the CRA may permit returns based on proposed legislation, unless laws are enacted, liability remains under existing statutes. Professionals can help assess implications specific to each situation. 

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Opinions and estimates are written as of the date of this report and may change without notice. Any commentaries, reports or other content are provided for your information only and are not considered investment advice. Readers should not act on this information without first consulting Milestone, their investment advisor, tax advisor, financial planner or lawyer. This communication is intended for Canadian residents only and does not constitute as an offer or solicitation by anyone in any jurisdiction in which such an offer is not allowed.