Ottawa, May 27, 2025 — In a significant move to support Canadian households amid rising living costs, the federal government is moving forward with its plan to deliver tax relief by cutting the lowest personal income tax rate from 15 per cent to 14 per cent. The change will take effect on July 1, 2025, and is expected to benefit nearly 22 million Canadians.
The reduction applies to the first $57,375 of taxable income in 2025, impacting all taxpayers regardless of their total income. The bulk of the savings will benefit Canadians in the two lowest income brackets, with nearly half of the total tax relief going to those in the lowest bracket.
Over the next five years, this measure is projected to save Canadians more than $27 billion. The government estimates that by 2026, the maximum individual tax savings will be $420, and up to $840 per couple.
Since the rate change takes effect midway through the year, the average tax rate for 2025 will be 14.5 per cent, followed by a full-year rate of 14 per cent in 2026 and beyond. The Canada Revenue Agency (CRA) will update its source deduction tables for the second half of 2025 to reflect the change, ensuring lower tax withholdings on employment income starting July 1.
This move marks one of the largest middle-class tax relief efforts in recent years and is being praised as a timely measure to put more money back into the hands of working Canadians.