In 2025, significant changes prompted Canadians to make major adjustments, from finances to how they check CRA letters. To start with, Canada Pension Plan (CPP) contribution rates increased. Federal tax brackets, as usual, were adjusted alongside inflation.
CRA’s phased transition to digital mail began in 2025, with different start dates for businesses and individuals. It may not directly impact your finances, but it’s important to stay updated as it changes how you receive tax information.
It’s more crucial now than ever to check your official mail, as CRA still penalizes missed deadlines, even due to unintentional negligence. You have the option, however, to opt out of electronic mail and revert to paper mail by updating your correspondence preferences in your CRA’s My Account portal.
Additionally, businesses see some relief as the government rescinds its new Digital Services Tax (DST).
Quick Overview of Changes in 2025
- CPP costs are higher
- Tax brackets adjusted for inflation
- CRA is going digital
- Digital Service Tax rescinded
Tax Brackets and CPP Contributions
For 2025, Canadians are seeing two major tax-related updates: inflation-adjusted tax brackets and increased Canada Pension Plan (CPP) contribution limits.
Federal Tax Brackets (2025 vs. 2024)
The federal tax brackets were adjusted to reflect inflation, allowing more income to be earned before entering higher tax tiers:
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Canada uses a marginal tax system, meaning each portion of your income is taxed at its applicable rate. These updated brackets mean you can earn more before being taxed at a higher rate.
Alongside tax bracket changes, CPP contribution limits also shift annually. Here’s how CPP contribution rates changed from 2024 up to the current year:
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The basic exemption, $3500, remains unchanged (source: CRA / CPA Pros).
CRA Moves to Digital Mail
One of the most significant administrative shifts in 2025 is CRA’s move to digital mail. If you are a business, you may have already been receiving CRA notices from May 12, 2025. If you are an individual taxpayer, you should have already been checking your official account since July 3, 2025. This shift has three main purposes:
- It speeds up delivery.
- It improves security.
- It also reduces costs for the government.
This new system makes you responsible for your tax mail. The CRA considers documents received on the day they are posted online. Check your CRA account regularly to avoid missed deadlines and penalties. You can always switch back to paper mail if you prefer (see CRA’s Online mail for business).
Digital Services Tax (DST) Withdrawn
To businesses’ relief, the Canadian government has officially withdrawn the proposed Digital Services Tax (DST). By stepping back, the government is aiming for a more coordinated international tax approach and reducing the compliance burden on affected businesses in the meantime.
This would have imposed a 3% levy on revenue earned by large tech companies like Google, Meta, and Amazon from digital services offered in Canada. This tax was intended to address tax fairness concerns while global tax rules were still being negotiated.
All DST requirements are off the table; no registration, no filings, no payments. Any DST payments made for periods up to June 30, 2025, will be refunded within the next fiscal cycle. The filing deadline is canceled, with no penalties or interest. This move also helps smooth over trade tensions, particularly with the U.S., which had strongly opposed the tax (see CRA’s Digital services tax).
How to Plan Ahead
The combined effect of higher CPP costs, shifting tax brackets, and new digital systems makes planning essential.
- Workers should review paycheques and adjust budgets for reduced net income.
- Retirees should review withdrawal strategies to offset potential tax impacts.
- Business owners should update compliance practices and track global tax negotiations.
Get Expert Tax Guidance
Tax brackets, CPP contributions, and CRA communication are all changing in 2025, affecting take-home pay, retirement planning, and business operations. Both individuals and businesses should modify their financial strategies to cope with increased CPP prices and tax regulations.
As financial and tax rules are changing, Canadians need a proactive approach. Legend Fusions helps individuals and businesses navigate these shifts. We assist you in protecting your income, growing your retirement savings, and keeping your business competitive.
Our team of experts can help you turn challenges into opportunities. Book a free consultation today!
Jeffrey Ross
Jeffrey Ross is an experienced tax accountant focused on US-Canada cross-border taxation, with over three years in the industry, including a key role as client manager at a Canadian tax firm. He provides expertise in corporate and personal tax planning, specializing in non-resident tax, capital gains, CRA and IRS compliance, and retirement planning. Known for his personalized approach, Jeffrey is dedicated to guiding clients with clear, practical advice tailored to complex tax scenarios, aligned with the evolving tax laws.