The 2026 Budget presents a crucial opportunity for the provincial government to support Ontario’s small businesses. With the budget set to be announced this spring, we are highlighting practical solutions to help small businesses navigate ongoing economic uncertainty. Business confidence in Ontario is extremely low, and weak demand has constrained growth for more than two years. Tax and regulatory costs remain the top cost pressure facing small firms.
Small business tax relief must be a central focus of Budget 2026.
Our top recommendation is to lower the small business tax rate from 3.2% to 2%, raise the eligibility threshold from $500,000 to $700,000, and index it annually to inflation.
Ontario currently maintains the highest provincial small business tax rate in the country (tied with Quebec). Lowering the rate would benefit nearly 350,000 small businesses, while raising the threshold would help almost 23,000 more. These measures would provide immediate relief and support reinvestment in both employees and operations.
On the tax front, we are also calling on government to:
- Reduce the Business Education Tax, where average business rates remain nearly six times higher than residential rates, and;
- Modernize the Employer Health Tax by raising the exemption threshold from $1 million to $2.25 million and index it to inflation annually;
- Introduce an informal training tax credit;
- Bring back apprenticeship tax credits;
Construction disruption also continues to be a major challenge for small businesses across the province. Prolonged, disruptive construction projects can severely impact nearby small businesses through lost foot traffic and revenue. A provincial compensation fund and changes to allow municipal financial relief would help ensure businesses can survive these disruptions.
Join CFIB as a member today and help us continue fighting for lower taxes, smarter policies, and a better environment for small businesses across Ontario.
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