First 90 days self-employed in Canada
Nobody is withholding tax for you any more. This is a week-by-week survival guide for the first three months of Canadian self-employment — what to register, how much to set aside, and which CRA deadlines actually matter.
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Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact CRA. Read our editorial scope →
Week 1 (Days 1–7): separate everything
- Open a separate business bank account. As a sole proprietor you can operate under your personal legal name — a dedicated chequing account is enough.
- Start an income log on day one: date, client, amount, method, description.
- Understand the no-withholding reality: every dollar you receive is gross. Tax, CPP, and (optionally) EI are entirely your problem.
- Register for CRA My Account and My Business Account. The security code arrives by mail and can take a week or more — start now.
- Save every business receipt into a cloud folder, organised by month.
Weeks 2–4: register and lock in a tax reserve
Get a Business Number (BN) from CRA — free, online via the Business Registration Online (BRO) portal, by phone at 1-800-959-5525, or by mailing Form RC1. You only need a BN if you are registering for GST/HST, payroll, import/export, or corporate income tax.
GST/HST threshold: mandatory registration when worldwide taxable revenues exceed $30,000 in any four-consecutive-calendar-quarter window (ITA s.148 of the Excise Tax Act / ETA s.240). Ride-share drivers must register from the first dollar — there is no $30k grace period.
Tax reserve table
| Net business income | Set aside |
|---|---|
| $40,000 | 20–22% |
| $80,000 | 28–32% |
| $150,000 | 35–40% |
Open a dedicated savings account labelled "Tax — DO NOT SPEND". Transfer the reserve percentage the same day money lands in the business account. Treat it as already gone.
Month 2: bookkeeping and deductions
- Set up bookkeeping mapped to T2125 categories: advertising, meals (50%), vehicle, office, professional fees, phone/internet, travel, subcontractors.
- Start a vehicle mileage log now. CRA requires contemporaneous records (IT-521R): date, start/end odometer, km driven, destination, purpose. Reconstructing it at year-end is a losing battle.
- Check home-office eligibility: principal place of business, or used regularly and exclusively for business and to meet clients. See the home office guide.
- Provincial registrations: Quebec dual filing (T1 + TP-1), Ontario Health Premium, BC PST, Manitoba and Saskatchewan PST where applicable.
Month 3: instalments, CPP shock, deadlines
Instalment threshold: CRA requires instalments when your net tax owing exceeds $3,000 in the current and either of the two prior years ($1,800 in Quebec). In year one you usually do not owe instalments — but you do owe the full lump sum next April.
CPP shock (2025)
| Tier | Rate | Earnings range |
|---|---|---|
| Base + enhanced CPP (self-employed) | 11.9% | $3,500 – $71,300 |
| CPP2 (self-employed) | 8% | $71,300 – $81,200 |
| Maximum 2025 contribution | $8,860.20 | |
EI opt-in: Self-employed can opt in to EI special benefits (maternity, parental, sickness) with a 12-month waiting period; pay the employee rate only (1.64% for 2025). Outside Quebec, you cannot collect regular unemployment benefits.
April 30 is the payment deadline. June 15 is the filing deadline for self-employed but interest starts accruing on May 1 if there is a balance owing. Most self-employed people should file by April 30 anyway.
Dollar shock box: $80k Ontario sole prop
| Item | Approx |
|---|---|
| Federal income tax | ~$12,500 |
| Ontario provincial tax | ~$5,500 |
| CPP + CPP2 | ~$8,000–$8,800 |
| Total owed in April | ~$26,000 |
Ten common mistakes (and what they cost at $80k)
- No tax reserve account → ~$26k bill with nothing in the kitty.
- Ignoring CPP — costs $8,000+ that nobody warned about.
- Late GST/HST registration past $30k → back-tax + penalties.
- No mileage log → $2,000–$5,000 in lost vehicle deductions.
- Filing June 15 with a balance owing → interest from May 1.
- Mixing personal and business accounts → audit nightmare.
- Claiming 100% home internet → instant CRA query.
- Forgetting meals are 50% deductible → reassessment.
- No HST collected from clients you billed → 13% comes out of your pocket.
- Not registering for My Business Account → can't see what CRA actually thinks you owe.
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