2026 Ontario Budget Highlights
On March 26, 2026, Peter Bethlenfalvy, Minister of Finance, tabled the 2026-27 Ontario budget. We have highlighted selected tax proposals from the budget that affect individuals and small businesses in Ontario.
INDIVIDUALS
Personal Tax Rates
The budget did not contain any changes to Ontario personal income tax rates or the surtax rates. The Ontario surtax is a tax calculated on the base amount of Ontario tax. Ontario indexed the 2026 provincial tax brackets by 1.9 per cent for inflation.
| 2025 Taxable Income | 2026 Taxable Income | Tax Rate |
|---|---|---|
| $0 to $52,886 | $0 to $53,891 | 5.05% |
| $52,886 to $105,775 | $53,891 to $107,785 | 9.15% |
| $105,775 to $150,000 | $107,785 to $150,000 | 11.16% |
| $150,000 to $220,000 | $150,000 to $220,000 | 12.16% |
| Over $220,000 | Over $220,000 | 13.16% |
Ontario Surtaxes
| 2025 Ontario Tax | 2025 Surtax Rate on Tax | 2026 Ontario Tax | 2026 Surtax Rate on Tax |
|---|---|---|---|
| $0 to $5,710 | No surtax | $0 to $5,818 | No surtax |
| $5,710 to $7,307 | 20% in excess of $5,710 | $5,818 to $7,446 | 20% in excess of $5,818 |
| Over $7,307 | 36% in excess of $7,307 + 20% of tax in excess of $5,710 | Over $7,446 | 36% in excess of $7,446 + 20% of tax in excess of $5,818 |
Top Combined Ontario and Federal Rates – 2026
| Other/Interest/ Salary/Pension | Capital Gains | Eligible Canadian Dividends | Non-eligible Canadian Dividends |
|---|---|---|---|
| 53.53% | 26.76% | 39.34% | 47.74% |
Top rates apply to taxable income over $258,482 ($253,414 for 2025) based on known federal and provincial rates as of March 26, 2026.
Personal Income Tax Measures
The government is proposing increasing the lump-sum payment threshold for the Ontario Trillium Benefit (OTB) starting July 1, 2026 as follows:
- OTB of $500 or less for the benefit year would receive one lump-sum payment in the first month of the benefit year.
- Individuals who will receive the OTB of more than $500 for the benefit year would continue to receive monthly payments starting in the first month of the benefit year (unless they choose to receive a single lump-sum at the end of the benefit year on their tax return).
Other Tax Measures
The budget proposes simplifying and reducing alcohol taxes, including reductions to taxes on beer, wine and spirits effective April 1, 2026. These measures will align with the implementation of the new LCBO wholesale mark-up pricing structure.
BUSINESSES
The budget proposes a cut to the small business corporate tax rate from 3.2 per cent to 2.2 per cent effective July 1, 2026. The budget did not propose any changes to the $500,000 small business income (SBD) threshold.
Ontario Corporate Tax Rates
| Income Type | Provincial | Federal | Combined Calendar 2026 |
|---|---|---|---|
| General corporate income | 11.50% | 15.00% | 26.50% |
| Small business income | 3.20%/2.20%1 | 9.00% | 12.20%/11.20%1 |
| Small business income over the federal limit and under the Ontario limit | 3.20%/2.20%1 | 15.00% | 18.20%/17.20%1 |
| CCPC* investment income | 11.50% | 38.67% | 50.17% |
| Non-CCPC investment income | 11.50% | 15.00% | 26.50% |
| Manufacturing & processing income | 10.00% | 15.00% | 25.00% |
* Canadian-controlled private corporation
1Proposed cut to the small business corporate tax rate effective
July 1, 2026.
Based on known federal and provincial rates as of March 26, 2026.
Business Income Tax Measures
- The government is proposing a cut in the Ontario small business corporate income tax (CIT) rate from 3.2 per cent to 2.2 per cent, effective July 1, 2026. To align with the CIT reduction, the Ontario small business (non-eligible) dividend tax credit will be reduced from 2.9863 per cent to 1.9863 per cent, effective January 1, 2027
- The government will temporarily remove the 8% provincial portion of the Harmonized Sales Tax (HST) on qualifying new homes valued up to $1 million. The province will also work with the federal government to propose that Ontario’s enhanced rebates be available from April 1, 2026 to March 31, 2027. The maximum rebate amount would be $80,000 for a new home valued up to $ 1.5 million, with a reduced rebate available for homes valued above $1.5 million.
- To align with the changes announced by the federal government, the Ontario government intends to allow businesses to accelerate the income tax deduction for the cost of depreciable assets. The changes would come into effect following the passage of federal legislation.
- The budget proposes that the Regional Opportunities Investment Tax Credit (ROITC) expire, effective January 1, 2027, given other proposed measures will be implemented such as the reduction in the CIT and accelerated write-offs for depreciable assets.
- Amendments to the Corporations Tax Act are proposed to provide insurance premium tax flexibility. This would enable all funded insurance benefit plans to elect to be treated as unfunded benefit plans, effective April 1, 2026. Plan holders would be eligible to make an election that would trigger an Insurance Premium Tax (CT-IP) liability once benefits are paid out of the plan, instead of when contributions are paid into the plan.
Refer to the 2026 Ontario Budget for further details.
Statistics and factual data and other information are from sources RJL believes to be reliable, but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities nor is it meant to replace legal, accounting, taxation or other professional advice. We are not tax advisors, and we recommend that clients seek independent advice from a professional advisor on tax-related matters. The information is furnished on the basis and understanding that RJL is to be under no liability whatsoever in respect thereof. This is intended for distribution only in those jurisdictions where RJL and the author are registered. Securities-related products and services are offered through Raymond James Ltd., Member of the Canadian Investor Protection Fund. Insurance products and services are offered through Raymond James Financial Planning Ltd., which is not a Member of the Canadian Investor Protection Fund.
