The Ontario government says it plans to cut the small business corporate income tax rate as part of its 2026 budget, a move it says would provide $1.1 billion in relief over three years.
The province proposes reducing the rate from 3.2 per cent to 2.2 per cent, representing a 31.25 per cent decrease. If passed, the measure would provide more than 375,000 small businesses with up to $5,000 in annual tax savings.
The government says the tax cut is intended to help businesses manage rising costs and economic uncertainty, including pressures linked to U.S. tariffs, while allowing owners to reinvest in growth.
“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.”
Finance Minister Peter Bethlenfalvy said the measure would help entrepreneurs expand and hire in a challenging global environment.
“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,” he said. “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.”
The tax cut builds on previous reductions and expanded eligibility introduced in recent years and is part of the province’s broader Tax Action Plan.
Ontario also says it would align with federal measures to allow faster write-offs for capital investments, a move expected to provide more than $3.5 billion in additional provincial income tax relief over four years.
The government says the proposal is part of its broader economic plan outlined in the 2026 budget, which aims to strengthen competitiveness and support businesses amid global uncertainty.
Dan Kelly, president and CEO of the Canadian Federation of Independent Business, welcomed the move.
“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.”
