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Ontario Cutting Small Business Tax by $1.1 Billion

7 April 2026

Provincial tax rate cut of 31.25 per cent would save more than 375,000 small businesses up to $5,000 per year

GEORGETOWN — The Ontario government is delivering on its plan to protect Ontario by building a more competitive, resilient and self-reliant economy with a $1.1 billion cut to the small business corporate income tax (CIT), from 3.2 per cent to 2.2 per cent, over the next three years. This tax cut, which is a 31.25 per cent cut to the existing rate, would provide more than 375,000 Ontario small businesses with up to $5,000 in tax relief every year. This tax relief, which is being delivered through the province’s 2026 Budget, if passed, will help small business owners manage rising costs and economic uncertainty in the midst of U.S. tariffs and allow them to reinvest the savings back into their business.

“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.”

The cut is a cornerstone of the government’s multi-year Tax Action Plan and builds on actions already taken to lower the rate from 3.5 per cent to 3.2 per cent in 2020 and expand eligibility to more businesses in 2023. To further support businesses, Ontario would also provide corporate income tax relief through paralleling federal measures that allow businesses to accelerate the write-off for a broad range of capital investments, including equipment and other assets. These measures would provide more than $3.5 billion in additional Ontario income tax relief over four years, helping businesses invest, grow and remain competitive.

“Small businesses are an essential part of Ontario’s economy. They are especially important in small and rural communities. This tax cut is great news for small businesses in my community and I’m proud to be part of a government that values our small businesses. It is measures like these that will help ensure we have the most competitive and resilient economy in the G7.” Said Joseph Racinsky, MPP for Wellington-Halton Hills.

These measures build on Ontario’s broader plan to protect workers and businesses from the impacts of U.S. tariffs and global economic uncertainty, including providing nearly $30 billion in relief and support since 2025. Through key actions taken since 2018, businesses would benefit from nearly $10 billion in estimated cost savings and support this year.

“The proposed reduction in the small business tax rate is a positive step and welcome relief for businesses in our community. At a time when many are navigating rising costs and uncertainty, this kind of support helps create room to reinvest, hire, and plan with greater confidence. We also welcome the renewed investment in programs like Summer Company and Starter Company Plus, which play an important role in supporting entrepreneurs and many of the small businesses that make up our local business network. Said Melanie Frazer, President & CEO of the Halton Hills Chamber of Commerce.

The 2026 Budget: A Plan to Protect Ontario outlines how the government is advancing its plan to protect Ontario by making the province one of the most competitive places to invest and do business in the G7, while building a more resilient and self-reliant economy.

Quick Facts

  • Ninety-eight per cent of businesses with employees in Ontario are small businesses.
  • Ontario’s Small Business Enterprise Centres (SBECs) provide advisory services, training and programs to help entrepreneurs launch and grow businesses. In 2024-25, Ontario’s network of more than 50 SBECs helped start over 8,000 new businesses, expand 2,700 existing ones and create more than 15,800 jobs.
  • The government implemented and temporarily enhanced and expanded the Ontario Made Manufacturing Investment Tax Credit (OMMITC) which offers a 15 per cent tax credit of up to $3 million per year to qualifying corporations to help lower costs, expand production and create jobs.
  • The Gasoline Tax has been cut by 5.7 cents per litre and the Fuel Tax by 5.3 cents per litre to help reduce the cost of gas and fuel for Ontario businesses.
  • The Employer Health Tax (EHT) exemption has been increased from $490,000 to $1 million helping businesses by reducing the tax for eligible private-sector employers.