Income taxes down, payroll taxes up — major tax changes for 2026

OTTAWA — It’s a mix of good news and bad news.

That’s how Franco Terrazzano, federal director of the Canadian Taxpayers Federation, described the major changes coming in the new year for Canadian taxpayers — with some levies going up, and others coming down.

“There’s some good news and bad news for taxpayers in 2026,” Terrazzano said.

“The federal government cut income taxes, but it’s hiking payroll taxes. The government cancelled the consumer carbon tax, but it’s hammering Canadian businesses with a higher industrial carbon tax.”

Courtesy of the CTF, here’s a look at what you will — or perhaps won’t — be paying to the tax man in 2026.

Payroll taxes — CPP and EI

Coming in 2026, Canadians can expect to see more going towards Canada Pension Plan (CPP) and Employment Insurance (EI) on their pay stubs.

According to the Canada Revenue Agency (CRA,) changes to the standard CPP benefit amounts are calculated once per year using the Consumer Price Index (CPI)  — obtained by comparing the price of a “basket” of goods and services between different time periods, and is a useful way of measuring inflation.

These metrics are normally divided into eight sections — food, shelter, household expenses, clothing, transportation, health and personal care, recreation, and alcohol/tobacco/cannabis.

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CPP benefits paid in 2025, according to the CRA, will increase by 2% in 2026, compared to the 2.6% increase that came in a year ago.

These increases mean workers can expect to pay an extra $262 next year.

For workers making over $85,000 per year, CPP and EI will cost them $5,770 in 2026, Terrazzano said, with employers paying $6,219.

Income tax

A key promise in the last federal election, Prime Minister Mark Carney followed through with his plan to cut taxes in the lowest marginal tax bracket from 15% to 14%, announced in May and put into effect as of July 1.

That’s a change that, according to the Parliamentary Budget Officer (PBO,) will save Canadians some money at the expense of government revenues —  costing the government $4.2 billion in 2025-26, gradually increasing to $6.4 billion in 2029-30.

This, Terrazzano said, should save the average taxpayer $190 in 2026.

Carbon taxes

While the Mark Carney Liberals cancelled the consumer carbon tax in April, carbon levies are still charged to industrial users and drivers are still paying what the CTF refers to as a “hidden carbon tax” concealed within Canada’s Clean Fuel Regulations, which could add as much as 17 cents per litre to the price at the pump, according to the PBO.

With the industrial carbon taxes set to increase to $110 per tonne in 2026 — many Canadians rightfully believe that those costs will be passed on to consumers, according to the results of an April Leger poll.

Alcohol taxes

Expected to cost Canadians $41 million in 2026/27, alcohol taxes are set to increase by 2% as of April 1.

This is due to Canada’s alcohol escalator tax, which since 2017, has imposed automatic hikes on beer, wine and spirits every April 1, without a vote in the House of Commons.

That’s also on top of the various tariffs Canadian producers face, as well as existing inter-provincial trade issues hamstringing local producers from selling their products across Canada.

According to industry estimates, the CTF says, the tax has cost taxpayers around $1.6 billion since it was introduced.

“Canadians pay too much tax because the government wastes too much money,” Terrazzano said, urging Carney to significantly cut taxes and spending — particularly the carbon tax.

“Canadians are overtaxed and need serious tax cuts to help make life more affordable and our economy more competitive.”

bpassifiume@postmedia.com
X: @bryanpassifiume