Ontario Cutting Small Business Tax by $1.1 Billion
April 2, 2026
Provincial tax rate cut of 31.25 per cent would save more than 375,000 small businesses up to $5,000 per year
The Ontario government is delivering on its plan to protect Ontario by building a more competitive, resilient and self-reliant economy with a $1.1 billion cut to the small business corporate income tax (CIT), from 3.2 per cent to 2.2 per cent, over the next three years. This tax cut, which is a 31.25 per cent cut to the existing rate, would provide more than 375,000 Ontario small businesses with up to $5,000 in tax relief every year. This tax relief, which is being delivered through the province’s 2026 Budget, if passed, will help small business owners manage rising costs and economic uncertainty in the midst of U.S. tariffs and allow them to reinvest the savings back into their business.
“Ontario’s small businesses are the driving force behind our economy, employing more than 2.5 million people,” said Nina Tangri, Associate Minister of Small Business. “We continue to support small businesses in these times of economic turbulence by providing additional tax relief that will allow them to reinvest in their companies and workers so they can scale-up, reach new customers and grow.”
The cut is a cornerstone of the government’s multi-year Tax Action Plan and builds on actions already taken to lower the rate from 3.5 per cent to 3.2 per cent in 2020 and expand eligibility to more businesses in 2023. To further support businesses, Ontario would also provide corporate income tax relief through paralleling federal measures that allow businesses to accelerate the write-off for a broad range of capital investments, including equipment and other assets. These measures would provide more than $3.5 billion in additional Ontario income tax relief over four years, helping businesses invest, grow and remain competitive.
“Small businesses are the backbone of Ontario’s economy, and our government is taking action to help them grow, invest and create good-paying jobs,” said Peter Bethlenfalvy, Minister of Finance. “Today’s tax cut will put more money back into the hands of local entrepreneurs in communities right here in Pickering-Uxbridge and across Ontario, giving them the flexibility to expand, hire and compete in an increasingly uncertain global environment.”
These measures build on Ontario’s broader plan to protect workers and businesses from the impacts of U.S. tariffs and global economic uncertainty, including providing nearly $30 billion in relief and support since 2025. Through key actions taken since 2018, businesses would benefit from nearly $10 billion in estimated cost savings and support this year.
The 2026 Budget: A Plan to Protect Ontario outlines how the government is advancing its plan to protect Ontario by making the province one of the most competitive places to invest and do business in the G7, while building a more resilient and self-reliant economy.
Quick Facts
- Ninety-eight per cent of businesses with employees in Ontario are small businesses.
- Ontario’s Small Business Enterprise Centres (SBECs) provide advisory services, training and programs to help entrepreneurs launch and grow businesses. In 2024-25, Ontario’s network of more than 50 SBECs helped start over 8,000 new businesses, expand 2,700 existing ones and create more than 15,800 jobs.
- The government implemented and temporarily enhanced and expanded the Ontario Made Manufacturing Investment Tax Credit (OMMITC) which offers a 15 per cent tax credit of up to $3 million per year to qualifying corporations to help lower costs, expand production and create jobs.
- The Gasoline Tax has been cut by 5.7 cents per litre and the Fuel Tax by 5.3 cents per litre to help reduce the cost of gas and fuel for Ontario businesses.
- The Employer Health Tax (EHT) exemption has been increased from $490,000 to $1 million helping businesses by reducing the tax for eligible private-sector employers.
Quotes
“Kudos to the Ontario government for responding to CFIB members’ top priority to lower the Small Business Tax Rate. Our 40,000 members across all sectors and regions of the province have told us they would invest any tax savings in measures like increasing employee compensation, expanding their operations, and hiring new employees – so it’s a win for businesses, people, and the economy.”
– Dan Kelly
President and CEO, Canadian Federation of Independent Business
“The small business tax relief in the 2026 Ontario Budget is a timely and welcome investment in our local economy. By easing the tax burden, it gives Uxbridge’s small businesses the breathing room they need to manage rising operational costs and reinvest in our community. A vibrant local business community is the heartbeat of our township, and we fully support these measures to help our entrepreneurs grow and succeed.”
– Dana Middleton
Chair, Uxbridge Business Improvement Area