2025 Federal Budget Highlights: What Canadians and Businesses Need to Know
The 2025 Federal Budget “Canada Strong”, presented on November 4, 2025, by Finance Minister François-Philippe Champagne, introduces targeted measures to boost productivity, support low-income Canadians, and advance clean energy growth—while keeping personal and corporate tax rates unchanged.
Below, the experts at Lekadir LLP summarize the key 2025 federal budget changes that will affect individuals, businesses, and organizations across Canada.
1. Key Personal Tax Changes in Budget 2025
Automatic Tax Filing for Low-Income Canadians
Starting with the 2025 tax year, the Canada Revenue Agency (CRA) will have new discretionary authority to automatically file tax returns for qualifying low-income individuals. The initiative aims to increase benefit uptake among Canadians who traditionally don’t file returns. Taxpayers will have 90 days to confirm or update their information before the CRA submits the return on their behalf.
5% Refundable Credit for Personal Support Workers
To recognize the vital role of caregivers, Budget 2025 introduces a Temporary Personal Support Workers Tax Credit—a 5% refundable credit (up to $1,100 annually) for eligible workers providing essential health support in hospitals, long-term care facilities, and home-care settings. This measure applies from 2026 through 2030.
Top-Up Tax Credit
To ensure fairness following the reduction of the lowest tax rate to 14.5% in 2025 (and 14% in 2026), a new Top-Up Tax Credit will preserve the value of non-refundable credits that might otherwise be reduced for certain taxpayers.
2. Business Tax Measures and Incentives
Accelerated Capital Cost Allowance (CCA) Expansion
Referred to as the “productivity super-deduction,” Budget 2025 reintroduces enhanced depreciation measures. Businesses investing in manufacturing, clean energy, and zero-emission technologies can claim up to three times the normal CCA rate for eligible assets acquired between 2025 and 2029—significantly improving after-tax cash flow for Canadian companies.
Immediate Expensing for Manufacturing and Processing Buildings
Companies acquiring or improving manufacturing or processing buildings will benefit from 100% immediate expensing for qualifying expenditures made after November 4, 2025. This is part of a broader federal initiative to stimulate investment in Canada’s industrial and manufacturing sectors.
Enhanced SR&ED Tax Credit Program
The Scientific Research and Experimental Development (SR&ED) program receives a substantial upgrade:
Expenditure limit increased from $3 million to $6 million
Capital expenditures are once again eligible for deduction and credit
Enhanced 35% refundable credit extended to certain public corporations
These updates make 2025 one of the most innovation-friendly budgets in recent years, encouraging businesses to invest in research and technology.
Worker Misclassification Enforcement
With widespread concerns about contractors being misclassified, particularly in trucking, the CRA will receive $77 million over four years to strengthen compliance and protect employee benefits.
3. Clean Economy and Green Investment Incentives
Canada’s 2025 Federal Budget reinforces the government’s commitment to building a cleaner economy through targeted tax credits and incentives:
Critical Mineral Exploration Tax Credit (CMETC) now includes minerals like bismuth, tungsten, molybdenum, and indium.
Clean Technology Manufacturing Investment Tax Credit expanded to additional minerals critical to renewable energy supply chains.
Carbon Capture, Utilization and Storage (CCUS) Investment Tax Credit extended at full rates until 2035, rewarding early adoption of carbon-reduction technologies.
Canada Growth Fund now qualifies for the 15% Clean Electricity Investment Tax Credit, making clean infrastructure projects more financially viable.
Together, these measures aim to position Canada as a global leader in green manufacturing and sustainable resource development.
4. International, Sales, and Excise Tax Updates
Modernized Transfer Pricing Rules
Budget 2025 updates Canada’s transfer pricing framework to align with the OECD’s international standards. Key changes include:
Raising the penalty threshold from $5 million to $10 million
Reducing the response deadline for documentation from 90 to 30 days
Introducing simplified documentation rules for qualifying taxpayers
These adjustments make cross-border tax compliance more transparent and predictable for multinational enterprises.
Elimination of the Underused Housing Tax (UHT)
Effective January 1, 2025, the Underused Housing Tax—a measure first introduced in 2022—will be fully repealed. Property owners will no longer be required to file UHT returns or pay related penalties after 2024.
Luxury Tax Revisions
The Luxury Tax on aircraft and vessels will be eliminated for transactions after November 4, 2025, though it will remain for vehicles valued above $100,000.
5. Other Key Measures
Bare Trust Filings Deferred to 2026, reducing administrative burden for many Canadians.
Non-Profit Organization reporting deferred until 2027, following stakeholder consultations.
Employment Insurance (EI) reforms, including expanded parental leave and pilot programs leveraging real-time payroll data.
New federal regulation planned for fiat-backed stablecoins, signalling an evolving focus on digital finance.
The government commits to $9 billion in annual spending reductions through efficiency reviews and automation within the CRA.
6. Previously Announced Tax Measures Reaffirmed
Budget 2025 confirms the continuation or implementation of several key measures:
Capital gains rollover for small business investments
Tax-free Canada Carbon Rebate for small businesses
Lifetime Capital Gains Exemption increased to $1.25 million
Cancellation of the proposed capital gains inclusion rate hike
These reaffirmations provide welcome stability and predictability for taxpayers and investors heading into 2026.
What This Means for You
The 2025 Federal Budget demonstrates a clear intent to stimulate investment, reward innovation, and simplify compliance—without increasing tax burdens.
For individuals, the focus is on inclusivity and support for essential workers.
For businesses, especially those in manufacturing, clean energy, and R&D, this budget offers powerful opportunities to reduce taxable income and reinvest in growth.
To ensure your business takes full advantage of these measures, reach out to the team at Lekadir LLP for expert tax planning, compliance, and advisory services.
Read the Full 2025 Federal Budget Commentary (PDF):
Click here to download the full report
