Canada Pension Plan Contributions (CPP)
With very few exceptions, anyone over the age of 18 who works in Canada and earns more than $3,500 per year is required to contribute to the Canada Pension Plan (CPP). For self-employed individuals, CPP is calculated on your personal return and included in your total income tax payable at the end of each year.
The CPP amount is calculated as 11.9% of your net business income (after expenses) up to a maximum of $8,068.20 for 2025.
Employment Insurance (EI)
EI contributions are optional for self-employed individuals including directors of a company owning more than 40% of the shares. When you contribute, it allows you access to maternity, parental, sickness, compassionate care, and family caregiver benefits if you need to stop working.
When you register for EI, the premium is calculated on your tax return and included in your total income tax payable each year. Premiums are calculated at $1.64 for every $100 you earn, up to a maximum of $1,077.48.
To register you will need to apply through Service Canada. Registering and cancelation is completed annually, so any changes must be made before December 31st each calendar year.
Make sure to notify your accountant if you are registered for EI contributions, as it is optional it will not automatically be applied to your tax return.
Registered Retirement Savings Plans (RRSPs)
A self-employed individual and owner of a corporation can still contribute to RRSPs. RRSP contributions can help lower your tax payable on your personal tax return.
RRSP room is calculated as lower of employment earnings and the annual RRSP limit. The employment earnings number includes net income from self-employment business earnings.
For most corporations, we recommend owners of the company pay themselves through both wages and dividends rather than dividends only. Dividends are not included in the employment earnings calculation.
