2025 Ontario Combined Tax Rates and Key Updates
This article provides an overview of 2025 updates to combined Federal and Ontario personal income tax rates (at the higher marginal tax brackets) and corporate income tax rates, as well as the prescribed interest rate and payroll deductions. This year’s updates also include revised RRSP and TFSA contribution limits. Tax optimization planning for business owners and high-net-worth individuals is highly complex and requires professional guidance. Please reach out to the Bateman MacKay tax experts for vital advice tailored to your situation.
Ontario Combined Personal Income Tax Rates
The personal income tax rates below reflect updates for 2025. These rates are subject to annual adjustments and are influenced by Federal and Provincial tax policies.
| 2025 Taxable Income | Ordinary Income | Capital Gains | Canadian Eligible Dividends | Canadian Non-Eligible Dividends |
| $150,000 – $177,882 | 44.97% | 22.48% | 27.53% | 37.90% |
| $177,882 – $220,000 | 48.29% | 24.14% | 32.11% | 41.72% |
| $220,000 – $253,414 | 49.85% | 24.92% | 34.26% | 43.51% |
| Over $253,414 | 53.53% | 26.76% | 39.34% | 47.74% |
Ontario Combined Corporate Income Tax Rates
The combined Federal and Ontario Corporate Income Tax rates remain stable, with no significant changes from the previous year. These rates are as follows:
- General Corporate Income Tax Rate: 26.5%
- Small Business Income Tax Rate: 12.20%
- Investment Income Tax Rate: 50.17%
The gradual reduction of the Small Business Deduction (SBD) limit introduced in prior years continues to apply. The SBD limit is reduced by $1 for every $80 of taxable capital in excess of $10 million and is completely eliminated when taxable capital equals or exceeds $50 million. This adjustment ensures a more gradual reduction of the SBD limit than previous thresholds.
Prescribed Interest Rate
The Federally prescribed interest rates effective from January 1, 2025, to March 31, 2025, are as follows:
- Interest rate on overdue taxes: 8%
- Interest rate on non-corporate tax refunds: 6%
- Interest rate on corporate tax refunds: 4%
- Interest rate for calculating taxable benefits for shareholders from interest-free and low-interest loans: 4%
- Interest rate on prescribed rate loans: 4%
Given that interest rates remain above historical lows, paying tax installments on time—whether monthly or quarterly, depending on corporate structure—is advisable to avoid accruing non-deductible interest.
Payroll Taxes
The Employment Insurance (EI) and Canada Pension Plan (CPP1 and CPP2) rates have been adjusted for 2025. The changes are outlined below:
- EI: The rate for 2025 is 1.64% based on maximum annual insurable earnings of $65,700. Maximum annual employee premiums and employer premiums have increased accordingly.
- CPP1: The employee and employer contribution rates for 2025 are 5.95%, with a maximum yearly contribution of $4,034.10 on earnings up to $67,800. Self-employed individuals will contribute at a rate of 11.90%.
- CPP2: The employee and employer contribution rates for 2025 are 4%, with a maximum yearly contribution of $396 on earnings up to $81,200. Self-employed individuals will contribute at a rate of 8%.
RRSP and TFSA Contribution Maximums
For 2025, the contribution limits for Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs) have been adjusted to reflect inflationary changes and statutory updates:
- RRSP Maximum: 18% of annual salary to a maximum contribution of $32,490 plus any unused contribution room from previous years. The maximum RRSP contribution limit applies to individuals earning at least $180,500 annually.
- TFSA Maximum: The annual TFSA contribution limit remains $7,000, with the ability to carry forward unused contribution room from prior years.
These tools remain critical components of a robust financial plan and can provide substantial tax deferral and savings opportunities when used effectively.
Tax planning is most effective when tailored to your unique circumstances. Our experts at Bateman MacKay LLP are here to help you navigate these updates and implement strategies to optimize your tax position for 2025 and beyond. Contact us today to schedule a consultation. Subscribe to our blog and follow us on LinkedIn for additional updates on tax, accounting and business advisory matters.
