Understanding 2025 Tax Updates & Self Employment Essentials

As trusted public accountants in St. Catharines, DDL & Co. is committed to helping individuals and business owners navigate the ever-evolving landscape of Canadian tax regulations. As the 2025 tax year is almost halfway complete, a number of important changes and reminders are worth highlighting—whether you’re an employee, a sole proprietor, or part of a growing family. From proposed personal tax rate reductions to key tax deadlines and deductions for home-based businesses, this blog offers timely insights to help you better understand your obligations and maximize potential savings.

A Closer Look at the Proposed Tax Rate for 2025

One of the most significant developments in Canadian tax news is the federal government’s announcement of a proposed reduction to the lowest marginal personal income tax rate, as part of its Middle Class Tax Cut plan. According to the Department of Finance, this change would lower the rate from 15% to 14%, phased in over two tax years. For the 2025 tax year, the rate would be effectively 14.5%, given that the change would take effect midway through the year on July 1, 2025. The full 14% rate would apply to the entire calendar year starting in 2026.

What Does This Mean for You?

While the numbers may seem small on paper, the reduction could lead to tangible savings for Canadian taxpayers—particularly those in lower and middle-income brackets. Individuals earning less than $55,000 per year would be the primary beneficiaries.

For most taxpayers:

• Individuals can expect to save up to $402 annually.
• Couples or families may see combined savings of up to $804.

Of course, the actual savings will vary depending on your total income and applicable deductions. That said, even modest reductions in tax rates can have a cumulative effect on household budgets—especially when paired with savvy financial planning and guidance from your trusted accountants in Niagara.

Important Deadlines for Self-Employed Canadians

Whether you operate as a freelancer, contractor, or small business owner, it’s essential to be aware of your unique tax responsibilities. One common misconception is that self-employed individuals get an “extension” to file. While it’s true that the filing deadline is June 15, there’s a critical caveat: any taxes owing are still due by April 30. This means if you wait until June to file, but owe taxes from the previous year, you could be accruing interest from May 1 onward. It’s a costly mistake that many self-employed taxpayers don’t realize until it’s too late.

Another important note: if your spouse or common-law partner is self-employed, and you are not, your return is still due on June 15. The Canada Revenue Agency (CRA) wants both returns submitted at the same time to ensure consistency and prevent processing delays. To help you stay on track, the CRA offers a comprehensive checklist for small business and self-employed tax filers, covering everything from income reporting to expense categorization.

Making the Most of Home Office Deductions

With the rise of remote work and home-based businesses, the ability to claim home office expenses is more relevant than ever. If you use a portion of your home exclusively to run your business, you may be eligible to deduct a range of related costs.

What Can You Claim?

Allowable expenses may include:

• Utilities such as heat, electricity, and water
• Internet service and a reasonable portion of phone bills
• Rent or mortgage interest
• Property taxes
• Home insurance
• Minor maintenance and repair costs

These expenses must be proportional to the space used for business purposes, and the CRA offers two accepted methods of calculating your deduction.

Room-Based vs. Square Footage Method

The simplified method involves dividing the number of rooms in your home and allocating one (or more) to business use. For instance, if you have six rooms and use one as a home office, you may claim roughly 1/6 of your eligible expenses. Alternatively, the square footage method involves measuring the actual workspace and dividing it by the total finished space in the home. This can yield a more accurate claim, especially in homes where rooms vary significantly in size. For detailed guidance on calculating and documenting these expenses, the CRA’s Business-Use-of-Home Expenses page is a valuable resource.

What to Do if You Receive a CRA Review Letter

Receiving a review or audit letter from the CRA can be unnerving, especially if you’re not sure why you’ve been selected. However, these reviews are often routine and don’t necessarily imply wrongdoing.

Here’s how to respond effectively:

1. Read the letter carefully. Understand what information the CRA is requesting.
2. Organize your documentation. Gather receipts, invoices, mileage logs, and any other supporting evidence.
3. Respond by the stated deadline. Failure to do so can result in reassessments or denied deductions.

Are Bank and Credit Card Statements Sufficient?

While bank and credit card statements can help support your claims, they do not meet the CRA’s requirements on their own. The CRA generally expects itemized receipts and detailed logs that clearly indicate the business purpose of each transaction. For example, a restaurant charge on your credit card statement isn’t sufficient to justify a meal expense—you’d need the actual receipt and a note indicating the client or purpose of the meeting.

Should You Invest in Cloud Bookkeeping Software?

Another common question we hear is whether self-employed individuals need to invest in cloud bookkeeping software. The answer depends on the complexity of your business. For smaller operations, spreadsheets and manual tracking may suffice. However, as your business grows, software like QuickBooks, Xero, or Wave can significantly improve your efficiency and accuracy. Some benefits include:

• Real-time financial reports
• Simplified invoicing and payment tracking
• Automated tax summaries
• Integration with your bank accounts

While not mandatory, these tools offer peace of mind and help ensure that nothing gets overlooked at tax time. Still unsure? Our public accountants in St. Catharines can help assess whether cloud bookkeeping software is the right choice for your business.

Don’t Forget: Registering for Your CRA Account

To manage your tax profile more easily, we strongly recommend registering for CRA’s My Account service. This secure online portal allows individuals and business owners to:

• Check the status of returns
• View or change personal information
• Set up direct deposit
• Submit supporting documents
• Track benefit payments and credits

You can get started by visiting the CRA’s guide on how to register for My CRA Account. Having access to your CRA account simplifies communication, reduces delays, and ensures you don’t miss important notices. For self-employed individuals, this access is especially useful for viewing installment reminders and confirming GST/HST account details.

What DDL & Co.’s Tax Experts Can Do for You

Whether you’re an employee adjusting to the new tax rate or a small business owner trying to understand deductions, DDL & Co. is here to support you. Our firm provides Tax as well as Assurance & Accounting services tailored to your unique financial situation. With decades of experience assisting individuals, families, and businesses across Niagara, we offer a proactive, informed approach that goes beyond filing your tax return. When you work with DDL & Co., you gain a partner in long-term financial planning. From identifying savings opportunities to guiding you through CRA reviews, we’re here to help every step of the way.

Final Thoughts With important tax changes taking effect in 2025, it’s never too early to prepare. Whether you’re interested in taking advantage of the new marginal tax rate, curious about home office deductions, or looking for reliable accountants in St. Catharines, DDL & Co. is your trusted source for guidance and support. Our team stays up to date on tax law changes so you don’t have to—and we’re always available to answer your questions. Ready to get started? Contact us to book a consultation with our experienced team of accountants serving the Niagara Region.