Canadian SE tax including CPP.
Total tax + CPP
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Income tax
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CPP (11.9%)
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Net after all
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Your breakdown
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Why the self-employed pay more CPP
The defining feature of working for yourself in Canada is that you pay both halves of the Canada Pension Plan. An employee contributes 5.95 percent of pensionable earnings and their employer quietly matches it. When you are self-employed you are both parties, so you remit the full 11.9 percent yourself. On the first chunk of earnings that is a meaningful bill that salaried workers never see on their pay stub. The CPP applies to pensionable earnings, which is your income between the $3,500 basic exemption and the year’s maximum of $71,300 for 2026. Earn below $3,500 and you owe no CPP at all; earn above $71,300 and CPP1 stops growing.
There is one consolation built into the rules and into this tool. Half of your CPP contribution, the notional employer half, is deductible against your income, and the other half generates a tax credit. The calculator applies the deduction before computing income tax, which is why your taxable income comes out lower than your gross business income.
A $80,000 sole proprietor in Ontario
Walk through net business income of $80,000 in Ontario. CPP applies to $67,800, which is $71,300 minus the $3,500 exemption, capped because $80,000 sits above the ceiling. At 11.9 percent that is $8,068 of CPP. Half of that, $4,034, is deducted, leaving taxable income of $75,966. Federal and Ontario tax both apply on that figure after their basic personal amounts.
That works out to an all-in burden of about 26 percent of gross business income, with CPP alone accounting for $8,068 of it. The CPP slice is the part that catches new freelancers off guard, because they budget for income tax but forget the doubled pension contribution.
EI is optional, and usually skipped
Unlike an employee, you are not required to pay Employment Insurance premiums, and this calculator does not include any. You can opt in to a special EI program for self-employed people that provides maternity, parental, sickness, and caregiving benefits, but it does not cover ordinary job loss, since you cannot lay yourself off. Most self-employed Canadians decline it. The one group that should think hard about opting in is anyone planning a pregnancy, because the parental benefits can far exceed the premiums paid. Once you opt in and claim, you generally must keep paying premiums for as long as you are self-employed.
The instalment surprise in year two
A practical trap: in your first year of self-employment you pay all your tax and CPP in one lump when you file. But once your net tax owing tops $3,000, the CRA expects quarterly instalments going forward, due in March, June, September, and December. New freelancers often get hit with a tax bill and an instalment demand in the same spring. Setting aside roughly 25 to 30 percent of every invoice in a separate account, as this example implies, keeps you ready for both.
Does incorporating cut my CPP?
It can, but it is a deliberate trade. If you incorporate and pay yourself dividends rather than salary, you avoid CPP entirely on the dividend portion, since dividends are not pensionable earnings. The catch is you also stop building CPP entitlement for retirement, and dividends do not create RRSP room because they are not earned income. Whether the savings beat the lost benefits depends on your income level and retirement plans, so model both before deciding.
Can I deduct business expenses before this calculation?
Yes, and you should. The income you enter here is net self-employment income, meaning gross revenue minus legitimate business expenses such as supplies, software, a reasonable home-office share, vehicle costs for business use, and professional fees. Lowering net income lowers both your tax and your CPP, so keeping clean records of deductible expenses directly reduces the bottom line shown above.