What Budget 2025 Means for Small Business Owners

Last updated: Nov. 6, 2025 

The 2025 Federal Budget, Building Canada Strong, is focused on three big goals:

• Building more homes
• Upgrading infrastructure
• Supporting businesses

All while the federal government pledges to tighten its fiscal belt.

For small business owners, farmers, and entrepreneurs, Budget 2025 brings both new opportunities and a few policy resets that could shape the year ahead. Here’s what you need to know.

The Big Picture

Canada’s Finance Minister tabled Budget 2025 on November 4, outlining a plan that mixes investment in growth with fiscal restraint.

• Deficit: $78.3 billion for 2025–26
• Debt ratio: On track to decline over time
• Federal corporate tax rates: Unchanged
• Capital gains inclusion rate increase: Cancelled
• Canadian Entrepreneur Incentive: Cancelled

In other words, this year’s budget avoids tax hikes and focuses on targeted relief, especially for businesses investing in innovation, clean energy, or productivity.

Key Highlights for Canadian Business Owners

1. Build It and Expense It

If your business manufactures or processes goods, there’s good news: you can now write off 100% of new or improved qualifying buildings the year they’re first used (before 2030).

That’s right — full immediate expensing. This can significantly improve your cash flow if you’re planning to expand your shop, plant, or facility. The deduction starts to phase down after 2030, so it may pay to move fast on expansion plans.

2. More Room for Innovation

The SR&ED enhanced refundable tax credit limit is increasing from $4.5 million to $6 million for tax years beginning after December 15, 2024.

That means more room to recover costs from research, product testing, or process improvements. If your business invests in innovation, this is your chance to maximize returns.

3. Clean Economy, Clear Opportunity

Canada’s clean economy incentives are getting a major boost — and they now reach more sectors.

• Carbon Capture, Utilization & Storage (CCUS) ITC: Full rates extended through 2035.
• Clean Electricity ITC: Now includes the Canada Growth Fund, and that financing won’t reduce your claim base.
• Clean Tech Manufacturing ITC: Adds new eligible critical minerals, including antimony, indium, gallium, germanium, and scandium.

If you’re investing in renewable energy, low-emission equipment, or green technology, there’s more support available to help fund your growth.

4. Dividend Deferrals Dialed Back

A new anti-deferral rule can temporarily pause dividend refunds for affiliated corporations that use staggered year-ends to defer tax.

Relief applies if income is “on-paid” by the payer’s balance-due date, so corporate structures and timing should be reviewed carefully.

5. Transfer Pricing Tightens Up

Canada’s transfer pricing rules are now aligned with the OECD 2022 standards. That means:

• Stricter documentation
• A higher $10M penalty threshold
• Faster response deadlines (30 days)

If your business operates across entities or borders, this is your cue to make sure your files are audit-ready.

Quick Hits for Advisors, Co-ops & Trusts

• Accelerated Write-offs Expanded: Immediate expensing now extends to more asset classes, including clean energy equipment and zero-emission vehicles. The full benefit applies until 2030.
• NPO Reporting Delayed: Enhanced non-profit disclosure rules will start later for years beginning after January 1, 2027.
• Bare Trust Reporting Deferred: Trustees get breathing room — no bare-trust filings required until tax years ending December 31, 2026, or later.
• Luxury Tax Trimmed: The tax on aircraft and vessels is eliminated after Budget Day, though vehicles remain taxed.
• Capital Gains Increase Officially Cancelled: A collective sigh of relief from entrepreneurs and investors alike.

Top 5 Things Every Canadian Should Know

1. The Middle Class Gets a Raise (Sort Of)

The lowest federal tax bracket drops to 14.5% in 2025 and 14% in 2026.
A new Top-Up Tax Credit (2025–2030) ensures big credits — like tuition or medical expenses — keep their full 15% value.

2. CRA Will File for You (If You Qualify)

Starting with 2025 tax returns, the CRA can automatically file simple returns for eligible low-income Canadians.

That means fewer missed benefits and less paperwork for people who need support most.

3. Housing and Wealth Taxes Simplified

The Underused Housing Tax (UHT) will be eliminated starting in 2025, and the Luxury Tax on aircraft and vessels is also ending.

These changes simplify compliance for property owners and small business investors alike.

4. Registered Plans and Home Reno Rules Simplified

By 2027, the government will unify investment rules across RRSPs, TFSAs, RESPs, RDSPs, and FHSAs, reducing red tape and confusion.

Starting in 2026, you also won’t be able to double-claim the same home renovation expense under both the Home Accessibility and Medical Expense credits.

5. A Win for Creators (and Maybe Eurovision Fans)

Budget 2025 sets aside $150M for CBC/Radio-Canada and $400M for Canadian culture, including the music and film industries.

There’s even a hint at Canada joining Eurovision — proof that even a fiscal plan can have a few fun surprises.

Honourable Mentions

• Parental Leave Compassion Update: Parents coping with the loss of a child will receive eight additional weeks of EI benefits — a small but meaningful fix to a difficult gap.
• Youth Jobs Programs Expanded: New funding for Canada Summer Jobs, Youth Employment and Skills Strategy, and the Youth Climate Corps.
• Registered Plans Modernized: The government is simplifying how registered investments are classified and phasing out outdated rules by 2027.

What This Means for FBC Members

This year’s Budget offers stability, opportunity, and some welcome simplification.

Now’s the time to:

• Revisit your investment plans — to capture full expensing before 2030.
• Review your SR&ED strategy — the higher $6M limit could open new refund opportunities.
• Clean up UHT filings before the repeal.
• Audit your corporate structure to avoid dividend deferral issues.

FBC’s experts can help you translate these policy changes into practical tax and planning strategies that keep your business growing strong.

Book a free consultation with an FBC tax advisor today to discuss how Budget 2025 impacts your business.