The federal budget was tabled on November 4, 2025. In this article, we discuss personal tax and benefit highlights, from the cancellation of the Underused Housing Tax to automatic tax filing for certain low-income individuals and lowering barriers to access the Canada Disability Benefit. We also highlight several corporate tax changes including the Productivity Super-Deduction and enhancements to the Scientific Research and Experimental Development Tax Incentive Program. We encourage you to explore those topics most relevant to your unique circumstances.

Cancellation of the Underused Housing Tax and changes to the luxury tax

The Underused Housing Tax (UHT) was introduced in 2022 to apply a tax on vacant or underused housing owned by certain non-resident non-Canadians. While the tax was intended to apply primarily to persons who were neither citizens nor permanent residents of Canada, some Canadians were still required to make tax filings. Budget 2025 proposes to eliminate the UHT as of the 2025 calendar year. 

The budget also proposes to end the luxury tax on aircraft and boats, effective November 5, 2025. However, the luxury tax will still apply to vehicles with a value above $100,000.

Automatic tax filing

Some government benefits are available only if an individual files a tax return. The budget proposes to allow the Canada Revenue Agency (CRA) to automatically file tax returns on behalf of certain low-income individuals, beginning with the 2025 tax year, to ensure more Canadians can access government benefits. The CRA would provide eligible individuals with the available information and a 90-day period to review and submit changes to the CRA before proceeding with the tax filing. Individuals would also have the option to opt out of automatic tax filing. 

Lowering barriers to access the Canada Disability Benefit

Beginning July 2025, the government began payments for the Canada Disability Benefit (CDB), up to $200 per month for eligible Canadians. Obtaining a valid Disability Tax Credit (DTC) certificate to become eligible for the CDB can represent a financial barrier. Budget 2025 proposes a one-time supplemental payment of $150 for each DTC certification, or re-certification, giving rise to a CDB entitlement. 

This one-time payment would be retroactive to the launch of the CDB with the first supplemental payments expected to be made before the end of 2026-27. 

Budget 2025 also confirms the government’s intention to make the CDB tax-free. 

Top-Up Tax Credit

In May 2025, Parliament proposed to reduce the lowest marginal tax rate from 15% to 14.5% for 2025 and 14% for the following years. Non-refundable tax credits like the basic personal amount and tuition credits are calculated based on the tax rate for the lowest bracket. In some cases, where a person has enough non-refundable tax credits to exceed the lowest tax bracket threshold ($53,375 for 2025), this has the unintended effect of increasing their taxes for the year.

Budget 2025 proposes to introduce a new non-refundable Top-Up Tax Credit. The credit would effectively maintain the current 15% rate for non-refundable tax credits claimed on amounts in excess of the first income tax bracket threshold. The Top-Up Tax Credit would apply for the 2025 to 2030 taxation years.

Personal Support Workers Tax Credit

As announced on October 27, this new tax credit would provide eligible personal support workers working for eligible health care establishments with a refundable tax credit of 5% of eligible earnings, with a value of up to $1,100. The credit will be available from 2026 through 2030 to eligible workers employed in provinces and territories not covered by an existing agreement to increase wages for personal support workers.

The Productivity Super-Deduction

When a new depreciable capital asset is purchased and available for use, a portion of its cost is deductible as Capital Cost Allowance (CCA) each year. Budget 2025 introduces the Productivity Super-Deduction—a set of tax incentives designed to allow businesses to deduct a larger portion of the cost of depreciable assets earlier. This includes two parts: a previously announced accelerated investment incentive that allows for higher first-year deductions for most capital assets, and immediate expensing rules to allow for the immediate deduction of the full cost of certain qualifying assets.

Immediate expensing is proposed to be available for manufacturing or processing machinery and equipment; clean energy generation, energy conservation equipment, and zero-emission vehicles; certain “productivity-enhancing” assets like patents, data network infrastructure, and computers; and, capital expenditures for scientific research and experimental development.

Immediate expensing will also be available for manufacturing or processing buildings acquired on or after November 4, 2025, that are used for manufacturing or processing before 2030. Additions or alterations to such buildings will also be eligible. This immediate expensing benefit will be phased out by 2033. 

Accelerated capital cost allowance will be available for liquefied natural gas equipment and buildings used in low-carbon LNG facilities acquired on or after November 4, 2025 and before 2035. Higher deductions are available for facilities with particularly high standards of emissions performance.

Increasing Scientific Research and Experimental Development Tax Incentive Program

Scientific Research and Experimental Development (SR&ED) tax incentives encourage businesses to invest in research and development. Budget 2025 proposes to implement a broad range of enhancements to this system that were previously announced. This includes extending the enhanced credit to eligible Canadian public corporations and restoring the eligibility of SR&ED capital expenditures, among other things. Additionally, Budget 2025 proposes to increase the annual expenditure limit from $3 million to $6 million (up from the $4.5 million limit that was previously announced), for tax years beginning on or after December 16, 2024.

The SR&ED program has historically had a high administrative burden. Budget 2025 proposes to reform and streamline the administrative process, including the introduction of a 90-day pre-claim approval process.

Misclassification of employees as independent contractors

Budget 2025 announces the government’s intention to crack down on cases in which an employee is mischaracterized as an independent contractor. This was especially common in the trucking industry, and led to concerns that employers were failing to make payroll withholdings correctly. This follows up on a pilot project that began in 2022, which was designed to educate taxpayers about personal services businesses (or “incorporated employees”). A personal services business can face a range of tax drawbacks, including denied deductions and additional corporate tax.