In a major move to ease the financial burden on Canadians, Prime Minister Mark Carney today confirmed the implementation of the federal government’s new middle-class tax cut, effective July 1.
The measure, which was a key campaign promise, is expected to benefit over 22 million Canadians and provide significant annual savings to working families.
Beginning today, the lowest federal personal income tax rate is reduced to 14%, marking the first stage of the government’s plan to strengthen economic security and put more money into the hands of Canadians. For the 2025 tax year, this mid-year rate change will result in an effective annual tax rate of 14.5%, with the full 14% rate applying from 2026 onward.
“With our new middle-class tax cut now in effect, Canadian families will save more and feel greater financial relief,” said Prime Minister Carney. “This government was elected on a mandate for change – to lower costs and support working Canadians – and we’re delivering on that commitment.”
The Canada Revenue Agency has already updated its payroll deduction tables to reflect the change. This means that employees and others with income subject to tax withholdings will begin to see higher take-home pay starting with their July earnings. Alternatively, taxpayers who do not see immediate changes in withholdings will benefit when they file their returns next year.
Finance and National Revenue Minister François-Philippe Champagne emphasized the broader economic impact of the tax cut. “At a time when global volatility continues to strain household budgets, this tax relief will help make life more affordable and fair,” he stated. “This is a step towards building a more inclusive economy where prosperity is shared.”
The federal government’s lowest personal income tax rate is now 14%, down from 15%.
In 2025, the effective tax rate will be 14.5% to reflect the mid-year implementation.
The measure will primarily benefit taxpayers earning under $114,750, with nearly half of the savings targeted at individuals earning $57,375 or less.
A typical two-income family could save up to $840 annually.
Non-refundable tax credits will continue to be calculated using the revised lowest rate of 14%.
The government maintains that this tax cut is part of a broader economic vision to reduce living costs, ensure community safety, diversify trade, and position Canada as a resilient and leading economy within the G7.
As Canada celebrates its national day, millions of families will now have a little more to celebrate — and to save.
