Toronto 
The federal government has announced plans to implement a middle-class tax cut, which was promised as part of the 2025 Liberal Party campaign platform.
The proposed measure, detailed Wednesday by Finance and National Revenue Minister François-Philippe Champagne, will reduce the lowest marginal personal income tax rate from 15% to 14%, effective July 1, 2025.
Per the news release, the tax reduction is expected to benefit nearly 22 million Canadians. Two-income families could save up to $840 annually by 2026. The federal government estimates the measure will result in over $27 billion in tax relief over a five-year period, beginning in the 2025-26 fiscal year.
To accommodate the mid-year change, the effective tax rate for 2025 will be set at 14.5%, with the full 14% rate applying from 2026 onward. The Canada Revenue Agency will update its payroll deduction tables for the second half of 2025 to ensure tax withholdings reflect the new rate beginning July 1.
Per the statement, the measure primarily targets individuals in the lower two tax brackets—those earning up to $114,750 in 2025—with approximately half of the total tax relief going to individuals earning $57,375 or less.
The federal government emphasized that the rate used to calculate most non-refundable tax credits will also be adjusted to match the new lowest personal income tax rate. This ensures consistency in how credits and deductions are applied.
Canadians who do not see the immediate impact through reduced withholdings will receive the tax relief when filing their 2025 returns in 2026.
