This guide reflects the rules for the tax year ending December 31, 2025.
It applies to individuals filing their 2025 tax return in 2026.
If you are self-employed in Canada, you must pay both the employer and employee portions of the Canada Pension Plan (CPP). This guide explains how CPP works, how much you must contribute, and how to calculate your CPP amount for the 2025 tax year.
🧭 1. What Is CPP? #
The Canada Pension Plan (CPP) is a mandatory retirement program for working Canadians. It provides:
- Retirement benefits
- Disability benefits
- Survivor benefits
Employees pay half of CPP contributions, and employers pay the other half.
Self-employed individuals must pay both halves.
📈 2. CPP Contribution Rate for 2025 #
For the 2025 tax year:
- CPP rate: 11.4% (combined employer + employee)
- CPP applies to: Net self-employment income
- Maximum pensionable earnings: $73,200
- Basic exemption: $3,500
This means CPP applies to:
\[ \text{Net income} - 3,500 \]up to the annual maximum.
🧾 3. How CPP Is Calculated for Self-Employed Individuals #
CPP contributions are calculated on:
- Schedule 8 (CPP Contributions on Self-Employment Income)
The formula:
\[ (\text{Net business income} - 3,500) \times 0.114 \]up to the maximum.
🧮 4. Example: CPP Calculation for 2025 #
You earned $60,000 in net self-employment income.
CPP applies to:
\[ 60,000 - 3,500 = 56,500 \]CPP contribution:
\[ 56,500 \times 0.114 = 6,441 \]You must pay $6,441 in CPP for 2025.
💰 5. CPP Is a Tax Deduction and a Tax Credit #
CPP contributions give you two tax benefits:
✔ 1. A deduction #
You can deduct half of your CPP contribution from your taxable income.
✔ 2. A non-refundable tax credit #
You receive a tax credit for the other half.
This reduces your overall tax bill.
🧮 6. Example: CPP Deduction + Credit #
Using the previous example:
CPP contribution: $6,441
-
Deduction:
\[ 6,441 \div 2 = 3,220.50 \]
-
Credit:
\[ 6,441 \div 2 = 3,220.50 \]
This structure ensures CPP contributions reduce your taxes in two ways.
📅 7. When Do You Pay CPP? #
CPP is paid when you file your tax return.
If your CPP + income tax owing exceeds $3,000, you may need to pay quarterly instalments the following year.
🧮 8. CPP and Multiple Income Sources #
If you have:
- Employment income and
- Self-employment income
CPP is calculated as follows:
- Your employer withholds CPP on your employment income
- You pay additional CPP on your self-employment income
- CPP stops once you reach the maximum contribution limit
CRA automatically adjusts this on Schedule 8.
🧓 9. CPP After Age 65 #
If you are 65 to 70, you can choose to:
- Continue contributing to CPP
- Or opt out (using Form CPT30)
If you opt out:
- You must give a copy to CRA
- And a copy to each employer
- Self-employed individuals stop contributing immediately
❓ 10. Frequently Asked Questions #
Do I pay CPP on gross or net income? #
CPP is calculated on net self-employment income.
Do I pay CPP if I have a loss? #
No — CPP only applies to positive net income.
Do I pay CPP if I’m over 70? #
No — CPP contributions stop at age 70.
Do I pay CPP on investment income? #
No — CPP applies only to employment and self-employment income.
Where do I report CPP? #
On Schedule 8, which flows to your T1 return.
🔗 11. Related Guides #
- Self-Employed Taxes in Canada
- Self-Employment Tax Deductions
- Self-Employment Expenses
- GST/HST for Self-Employed Canadians
