Budget 2026 was introduced by the federal government on November 5, and for many taxpayers, the news that really counts is what didn’t change. There are no changes to either personal or corporate income tax rates. What did change, however, is an extensive list of targeted initiatives: a new $15-million capital gains exemption, a new filing deadline of May 15, increased instalment thresholds and increased penalties. These are all proposals at this point, and timing becomes critical. Here’s what’s changed, who it affects and what you need to do before year-end.
What hasn’t changed in Budget 2026
Taxes continue at the same rates. There have been no changes listed for the 50% inclusion rate for capital gains in the budget documentation we’ve reviewed, meaning the proposed two-thirds tax remains off the table.
The 2026 numbers are unchanged. Federal taxes start at 14% on the first $58,523, with the basic personal amount being $16,452, RRSP contribution room being $33,810, and the TFSA amount being $7,000.
Please note that budgetary proposals are not laws until Parliament enacts them. The legislation underlying many of the dates below hasn’t been introduced yet.
What Is the Canada Growth Incentive?
This is the key feature of the budget. The Canada Growth Incentive would allow a qualifying individual to claim a capital gains exemption of up to $15 million on the sale of qualifying shares.
Unlike the lifetime capital gains exemption, there is no lifetime limit. This limit will apply to each qualifying business individually.
The conditions are stringent:
- The shares should have been issued on or after November 5, 2026 and before 2037.
- The company should be a Canadian-controlled private corporation at the time of issuance of the shares, having total assets of $100 million or less.
- The shares should have been issued for cash or for employment services.
- The shares should be held for at least 36 months before disposal.
This implies that no claims can be made before late 2029. There are also additional rules regarding the interplay between this exemption and the lifetime capital gains exemption and the alternative minimum tax, which are yet to be clarified.
Is selling a small business easier?
Partially. Rollover for reinvestment of gains realised on small business shares will become less stringent on sales after January 1, 2027.
Your time to purchase replacement shares will be extended up to the end of the third year after the disposition. The strict 90% active asset test will only be applicable upon issuance and disposition of shares; there will be a relaxed level in between.
Intergenerational rollovers for farmland and fishing properties will also include nieces, nephews, grandnieces, and grandnephews starting from the said date.
What is the new due date for taxes?
The proposed budget sets the May 15 date for both the filing and the remittance of taxes. This will apply to 2027 and beyond. No change is expected in your 2026 tax filing due date.
For most taxpayers, it increases their time to file their tax return before the April 30 deadline. The only category of people who will experience a shortened period for tax filing is the self-employed.
What changes regarding tax instalments?
The minimum amount at which instalments would be mandatory would increase from $3,000 to $7,500 for corporations and for individuals not residing in Quebec. The requirement would apply to taxation years beginning on or after January 1, 2028, and thereafter indexed.
For a small corporation expecting tax of $5,000 per year, it would result in no tax instalments at all beginning in 2028, as $5,000 is below the new $7,500 level.
Individuals who generate mostly business income would have the option to pay a single annual instalment instead of four. It would be two-thirds of their net tax payable and paid by December 31, beginning in 2028.
What is the “RRSP for life” proposal?
The government will combine the RRSP and RRIF regulations. Your RRSP will not have to be converted by the age of 71, but mandatory withdrawals will begin at 72.
The government is also asking whether the plan can be kept in place as a successor holder for the surviving spouse. The comment period ends on January 8, 2027. Should you be thinking about retirement income, our Retirement and Pension Income Tax Return Guide explains the current system.
Smaller changes for individuals
- Flat amount claims: You may claim flat amounts beginning in 2027 on costs such as moving expenses and home accessibility amount without holding all receipts.
- Medical claims: The choice of $1,000 flat amount for gluten free foods begins in 2026. Certain costs will not require a prescription.
- Canada caregiver credit: The Canada caregiver credit will be a 100 percent refundable tax credit starting in 2027.
How will Budget 2026 affect business owners?
How will Budget 2026 affect business owners?
Dividends declared on or after November 5, 2026, by Canadian-controlled private companies would be exempt from the tax on taxable preferred shares. Also, the dividend allowance for such a tax is increased from $500,000 to $1.5 million.
The scope of SR&ED claims is widening as well. From tax years starting on or after November 5, 2026, regulatory and certification testing, as well as expenditures related to the registration and maintenance of intellectual property, can potentially be eligible.
Moreover, the government has assured its intentions to move forward with the Productivity Mega Deduction announced separately back in September.
CRA correspondence, objections and penalties
As of June 16, 2025, CRA correspondence for most businesses is available electronically via My Business Account. Notices of assessment, audit and collection notices can be ignored, but the deadlines remain applicable.
A paper correspondence may be requested using Form RC681. This application is renewed every two years.
Budget 2026 introduces three additional measures:
- The deadline to file an objection would increase from 90 days to one year, but the extensions would no longer be available.
- Most fixed dollar penalties would be increased, and there would be penalties for repeated failures to file.
- The CRA would be able to disclose tax arrears over $50,000 to credit reporting agencies after sending a letter.
Trusts and estates’ cross-border changes
The thresholds for T1135 reporting double. The threshold for the reporting of foreign property increases from $100,000 to $200,000 and for simplified reporting from $250,000 to $500,000, for years ending after 2026.
Rollovers for trust property would not be allowed for distributions to corporations or partnerships where at least one of the owners is a non-resident individual, starting from November 5, 2026. There is no exemption for this change in the draft.
Withholding tax on disposition of Canadian property by non-residents would decrease from 25% or 50% to 15% or 30%, starting January 1, 2027.
What should be done before year-end?
- Ensure that someone has access to My Business Account and an up-to-date notification email.
- Determine whether any anticipated share issuance or investment could qualify for the Canada Growth Incentive.
- Consider foreign property for 2026 T1135 reporting based on the new thresholds.
- Model year-end compensation and RRSP and TFSA contribution levels using the 2026 figures.
- Be aware of draft legislation, as most proposed changes will not take effect until passed by Parliament. The government has also stated that a second round of tax simplification changes will be introduced in the 2027 spring economic update.
- If your corporation currently makes instalments, determine whether the higher threshold would eliminate them after 2027.
Beta Taxes is a licensed accounting firm in Ontario and is staffed with licensed CPAs in Canada. Should you require assistance applying these to your tax filing or your business, feel free to contact us.
