Canada Announces $27 Billion Tax Relief – Middle-Class Families To Save Up To $840 A Year Starting In 2025
In a move that promises significant financial relief for millions of Canadians, the Government of Canada has unveiled a major tax cut for middle-class families, starting in July 2025.
The centerpiece of this tax relief package is a reduction in the lowest marginal personal income tax rate from 15% to 14%, a change that will benefit nearly 22 million taxpayers.
This article provides a full breakdown of the new measures, including who benefits, how much you’ll save, when the changes take effect, and additional updates for businesses impacted by U.S. tariffs.
What’s Included in the Tax Relief Plan?
The federal government’s tax relief plan is aimed at reducing the tax burden on low- and middle-income Canadians, who are most affected by inflation and rising living costs. Here are the key features:
- Lowest personal tax rate cut from 15% to 14% starting July 1, 2025
- Full-year blended rate of 14.5% for 2025
- Estimated $27 billion in tax savings over 5 years
- Savings of up to $840/year for dual-income families by 2026
- Benefits primarily individuals with income under $114,750
- Source deduction tables to be revised by Canada Revenue Agency (CRA) starting July 2025
Impact on Taxpayers
Who Benefits?
This tax cut is targeted specifically at middle-class earners, which include those in the two lowest income brackets.
| Income Bracket (2025) | Tax Rate Before | New Tax Rate | Estimated Annual Savings |
|---|---|---|---|
| Up to $57,375 | 15% | 14% | Up to $400 |
| $57,376–$114,750 | 20.5% | Unchanged | Partial savings |
| Above $114,750 | 26%+ | Unchanged | No direct savings |
Nearly half of the tax savings will go to those earning $57,375 or less, directly benefiting low-wage workers, young families, and retirees with modest pensions.
How It Will Be Applied
Tax is assessed annually, but since the new rate takes effect mid-year, CRA will implement a 14.5% blended rate for 2025. From 2026 onward, the full-year rate will be 14%.
Revised Withholding Rules
Starting July 1, 2025, the CRA will revise source deduction tables, allowing employers to reduce tax withholding at the new rate. This means more take-home pay starting immediately for millions.
If adjustments aren’t made during payroll processing, taxpayers will see the benefit when they file their 2025 returns in spring 2026.
Additional Support for Businesses Affected by U.S. Tariffs
The Minister of Finance also announced three major relief measures to support Canadian businesses impacted by tariff disputes with the United States:
1. Performance-Based Remission for Automakers
- Incentives for automakers to continue production in Canada
- Ability to import CUSMA-compliant U.S. vehicles tariff-free
2. Temporary Tariff Relief on Essential Imports
- 6-month suspension of tariffs on goods from the U.S. used in:
- Food & beverage packaging
- Public health and healthcare
- National and economic security sectors
3. Large Enterprise Tariff Loan Facility (LETL)
- Financial assistance program for large businesses
- Targets industries critical to food security, energy, and national infrastructure
- Applications now open
Economic & Political Context
The decision follows a massive online petition and mounting public pressure, especially from families coping with inflation. Finance officials have maintained that the tax cut is fiscally responsible, with cost projections spread over a five-year period.
The government has emphasized that Canada continues to offer the most generous Personal Allowance among G7 nations and is committed to making work pay.
Key Benefits at a Glance
| Benefit | Details |
|---|---|
| Lower tax rate | 15% reduced to 14% starting July 1, 2025 |
| Estimated tax savings | $27 billion from 2025–2030 |
| Household savings | Up to $840/year for two-income families |
| CRA updates | New deduction tables apply from July 2025 |
| Business relief | Tariff remission, import relief, and business loans |
The Canadian government’s new tax relief plan is set to deliver real financial benefits to millions of citizens—especially middle-class families.
With a lower tax rate, reduced payroll deductions, and targeted business relief, the plan reflects a strong commitment to easing economic pressure while boosting household incomes.
By 2026, many families could see hundreds of dollars in annual tax savings, helping them better navigate the rising cost of living. Stay informed by reviewing your payroll details in July 2025 and filing your taxes on time to ensure you maximize your benefits.
FAQs
When will I see the tax savings in my paycheck?
Starting July 2025, tax withholdings will decrease for employees as CRA updates deduction tables. If not, you’ll receive the tax savings when you file your 2025 return.
Who qualifies for the tax relief?
Anyone earning up to $114,750 in taxable income will benefit. The biggest savings go to those in the first tax bracket (up to $57,375).
Are businesses included in this plan?
Yes. Canadian businesses impacted by U.S. tariffs will benefit from new remission frameworks and access to the Large Enterprise Tariff Loan Facility.