2026 federal budget: key tax and benefit highlights

Budget 2026 was tabled on Nov. 5, 2026, and featured what the federal government describes as “the most ambitious tax simplification effort in decades.” In this article, we provide an overview of certain measures designed to simplify the tax system along with proposed registered account changes. We also discuss personal tax and benefit changes along with business tax highlights.

Budget 2026 proposes certain changes to simplify the tax system, making it easier for individuals to file their tax returns. 

New income tax return filing and balance-due dates for individuals

The current filing deadline for most individual tax returns is April 30 following the end of the taxation year. A June 15 deadline applies for self-employed individuals and their spouses or common-law partners. All tax balances owing for individuals are due by April 30.

Budget 2026 proposes to create a single deadline of May 15 for all individual tax returns and balance-due dates, starting May 15, 2028 for the 2027 tax year.

Instalment payments for individuals and corporations

In Canada, tax is meant to be paid as income is earned throughout the year. While salaried employees have tax automatically withheld from their paycheques, individuals earning significant investment income, rental income, or self-employment income must manage this process manually in the form of tax instalments. Currently, individuals are required to pay taxes via quarterly instalments if their net tax owing exceeds $3,000¹ for the current year and either of the two preceding years.

Similarly, corporations have to pay corporate income taxes by instalment payments throughout the year, with many Canadian-controlled private corporations eligible for quarterly, rather than monthly, instalment payments. Federal instalment payments are required where taxes payable, before the deduction of refundable tax credits, exceed $3,000¹ for either the current or prior year. 

Budget 2026 proposes to increase this threshold to $7,500² for both individuals and corporations. The threshold would be indexed to inflation and rounded to the nearest $500. Any remaining tax payable for a taxation year would be due on the applicable balance-due date. This measure would apply to taxation years that begin on or after Jan. 1, 2028.

Currently, only individuals whose primary source of income is from farming or fishing are permitted to remit a single annual instalment rather than quarterly payments. Budget 2026 proposes to extend this treatment to individuals whose primary source of income is from a business, including professional or commission income. Eligible self-employed individuals will be allowed to make a single annual instalment by Dec. 31, equal to two-thirds of their combined federal-provincial net tax owing, with the remainder due on the applicable balance-due date. This measure would apply to the 2028 and subsequent taxation years.

Optional flat amounts for personal income tax deductions and credits

Several tax benefits require individuals to keep receipts and itemize their expenses. Budget 2026 introduces an alternative flat-amount calculation for some of these deductions and credits, avoiding the need to retain receipts. While individuals must still prove they qualify for the benefit, this can simplify their record-keeping requirements. This would take effect in the 2027 taxation year.

Some of the deductions and credits that are proposed to qualify for this optional flat amount include the following:

• Moving expense deduction (flat amount: $1,000 per eligible relocation)
• Clergy residence deduction (flat amount: $1,000 per month)
• Labour mobility deduction for tradespeople (flat amount: $1,500 per year)
• Home accessibility tax credit (flat amount: $1,000, one time claim)
• Adoption expense tax credit (flat amount: $1,200 per adopted child)

Further tax simplification measures will be announced in the Spring Economic Update.

Registered Disability Savings Plan (RDSP) 

The RDSP is a long-term registered savings plan to help people with disabilities save for their future financial security. The holder of an RDSP is the individual that opens the RDSP with the issuer and is responsible for managing the RDSP. Specifically in the case of an adult beneficiary whose contractual competency is in doubt, a qualifying family member, either a parent, spouse/common-law partner, or sibling of the beneficiary, could be an RDSP holder under a temporary measure. Budget 2026 proposes to make the qualifying family member measure permanent.

Consultation on merging Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs)

Budget 2026 announces a consultation on merging RRSPs and RRIFs into a single “RRSP for Life.” While maintaining mandatory minimum annual withdrawals after age 71, the budget proposes to eliminate the requirement for individuals to convert their RRSP into a RRIF. Consideration is also being given to options that could simplify the process for RRSP assets at death and the required tax reporting for qualifying beneficiaries.

2027 Canada Groceries and Essentials Benefit Supplement

The Canada Groceries and Essentials Benefit (CGEB) provides tax-free quarterly payments to individuals and families with low- and modest-income. The amount of the benefit and your eligibility will depend on your family structure and income level. In most cases, there is no application required—CRA will determine your eligibility when you file your tax return. 

Budget 2026 introduces a one-time 50% increase for the 2026-27 benefit year delivered in early 2027, providing up to $339 for a single person without children and up to $679 for a couple with two children.

Refundable Canada caregiver credit 

The Canada caregiver credit (CCC) is currently a non-refundable tax credit available to individuals who support a family member with a mental or physical infirmity. Budget 2026 proposes to make the CCC refundable. This allows eligible caregivers to receive the full amount of the credit even if they do not have a tax liability. The credit amount will continue to depend on the caregiver’s relationship to the person receiving support and their net income, among other things. Eligible caregivers could receive up to $1,260 annually for the 2027 taxation year, indexed thereafter. This measure would apply to the 2027 and subsequent taxation years. 

Northern residents deductions

Budget 2026 proposes to update the northern residents deductions to make this benefit easier to access. These deductions include the residency deduction and the travel deduction. 

Historically, the residency deduction was restricted by the amount of non-taxable employer-provided benefits received for board and lodging at special work sites in the North, and capped at 20% of the individual’s net income. Both of these restrictions are proposed to be eliminated, increasing the value of this deduction for individuals living and working in prescribed zones.

The travel deduction allowed deductions in respect of travel for individuals and their family members in certain cases. This was historically limited to (among other things) the total amount of employer-provided travel benefits received in respect of the trip or the portion of a $1,200 standard amount allocated to the trip. This limit is proposed to be eliminated, improving the deductibility of trip expenses for northern residents and workers, even in cases in which they receive employer-provided travel benefits.

Expansion of the intergenerational farm and fishing property rollover 

The intergenerational farm rollover is a tax benefit available to business owners and families in the farming or fishing industry. When it is available, the rollover can allow a person to pass certain kinds of property (such as farmland, depreciable farm property, or shares in a family farm or fishing corporation) to the next generation without triggering the capital gains at that time. For more information about how this rollover applies until the end of 2026, please consult our Farm Succession Guide.

The existing rules allowed for a tax-deferred transfer of qualifying property from parents to children, grandchildren, and great-grandchildren, including an adopted child, step-child or child-in-law. Budget 2026 proposes to expand the rollover so that it is also available for transfers to a niece, nephew, grandniece, or grandnephew of the taxpayer or the taxpayer's spouse or common-law partner. This measure would be effective for transfers that occur on or after Jan. 1, 2027.

The $15 million capital gains exemption - The Canada Growth Incentive

Budget 2026 has proposed a new capital gains tax exemption on shares of eligible Canadian businesses that meet certain requirements. If a Canadian resident individual over the age of 18 sells shares that qualify for this exemption, they will avoid tax on up to $15 million of capital gains.

In order to qualify for the exemption, the shares must be held for at least 36 months, and several requirements must be met at the time the shares are issued, throughout the holding period of the shares, and at the moment the shares are disposed of. Among other things, the corporation must use certain amounts of its assets to carry on active business (as opposed to holding investment assets), which must be carried on principally in Canada for at least a minimum period of time. The shares must have been issued solely in exchange for cash or employment services, and the company must be a Canadian-controlled private corporation at the time the shares are issued.

Only certain types of businesses will be eligible for this benefit. It is not available to, among other things, consulting businesses, most kinds of professional services, franchises, and businesses in certain sectors like insurance, real estate, food, accommodation, recreation, and entertainment.

The exemption is proposed to be available for shares that are issued on or after Budget Day and before 2037. More fulsome rules will be published at a later date.

Expanded tax deferral on small business shares - The Canada Growth Incentive

Canadian individuals who sell shares of an eligible small business corporation (ESBC) may defer their capital gains tax if the proceeds are reinvested into new ESBC shares within certain deadlines. This is possible only if, among other things, the shares were held for at least 185 days. Additionally, substantially all of the company’s assets must have been used in the course of carrying on active business throughout the holding period (which must have been carried on primarily in Canada for at least a minimum period of time).

Budget 2026 proposes to expand these rules to make it easier to qualify for this rollover treatment. Previously, the seller needed to reinvest the sale proceeds into shares of a new ESBC before the end of the following calendar year. The newly proposed rules would extend this deadline to reinvest until the end of the third calendar year following the year of disposition. This can be extended to five years, in some circumstances. Further amendments are proposed to loosen the requirements for the shares to qualify as ESBC shares.

This expanded rollover is proposed to apply to dispositions on or after Jan. 1, 2027.