Canada's new tax cut is officially on — Here's how much more your next paycheque should have

Canada's new income tax cut is officially here — and it could already mean a little more cash in your next paycheque.

As of July 1, the federal government has dropped the personal income tax rate for the lowest bracket from 15% to 14%, a move that the Canada Revenue Agency is already rolling out in its updated payroll deduction tables.

If you're earning income in Canada, especially in a middle-class tax bracket, there's a good chance you're going to notice a difference.

This change to tax in Canada means that starting now, employers will begin withholding a bit less from every paycheque. While the tax cut hasn't officially been passed into law yet, the government is moving ahead with implementation now in anticipation of the motion being adopted by Parliament.

According to Finance Canada, nearly 22 million people will benefit from the tax cut, with the majority of savings going to those making less than $114,750 this year. And while it's only a drop of one percentage point, the savings can add up — think up to $420 per person or $840 for couples when fully implemented in 2026.

Since the new rate kicked in exactly halfway through the year, the first bracket tax rate for 2025 will land at 14.5%. But the CRA is already applying the 14% rate to source deductions from now until December, which means your next paycheque could look a little sweeter.

If you earn at least $57,375 per year, the top end of the first tax bracket, you could see about $16 more in each biweekly paycheque — or close to $35 if you're paid monthly. That's assuming your employer has updated their payroll deductions to reflect the new 14% withholding rate for the second half of the year, which the CRA is urging employers to do.

With 13 biweekly pay periods between now and the end of December, that adds up to around $206 in extra take-home pay per person this year.

And if your workplace hasn't made the change yet, don't worry — you'll still see that money as a refund when you file your 2025 tax return next spring.

The feds say the goal is to help Canadians cope with the rising cost of living and keep more of their earnings to spend where it matters most.

"Every Canadian should be able to afford necessities, feel secure, and get ahead financially," said Finance Minister François-Philippe Champagne in the announcement back in May, calling the move a step toward long-term economic growth.

Whether you're paid weekly, biweekly or monthly, if you're one of the millions with income under six figures, your wallet might just start to feel a little heavier this summer.

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