How Much CPP Do Self-Employed Canadians Pay?

If you're newly self-employed in Canada, your first tax bill can come with an unexpected surprise: CPP.

When you're an employee, Canada Pension Plan (CPP) contributions come off each paycheque automatically, and your employer pays an equal share.

When you're self-employed, there's no employer paying the other half.

You pay both portions yourself.

That can add up to thousands of dollars, so it's worth understanding how CPP works before tax time arrives.

How does CPP work when you're self-employed?

For most employees outside Quebec, CPP contributions are split between the employee and employer.

If you're self-employed, you're effectively both.

For 2026, the CPP contribution rate is 5.95% for an employee and another 5.95% for the employer. A self-employed person therefore pays a combined rate of 11.9% on applicable pensionable self-employment earnings.

There is an annual basic exemption of $3,500, and CPP contributions are subject to annual earnings limits.

For 2026, the first earnings ceiling (YMPE) is $74,600.

The maximum regular CPP contribution for a self-employed person in 2026 is $8,460.90.

There can also be additional CPP contributions for higher-income self-employed individuals.

These figures come from CRA's published CPP contribution rates, maximums and exemptions, which are updated each year.

What is CPP2?

Canada introduced a second CPP earnings ceiling as part of the CPP enhancement.

In 2026, if your applicable earnings are above $74,600, you may also pay CPP2 on earnings between $74,600 and the second earnings ceiling of $85,000.

For self-employed individuals, the CPP2 contribution rate is 8% on earnings within this range.

The maximum self-employed CPP2 contribution for 2026 is $832.

That means someone with sufficient self-employment income could pay up to $9,292.90 in combined CPP and CPP2 contributions for 2026.

CRA publishes the CPP2 rates and maximums separately.

CPP is based on profit, not your business revenue

This distinction is important.

CPP isn't simply calculated on all the money that came into your business.

For a sole proprietor, your business income and eligible business expenses are reported on your personal income tax return, generally using Form T2125, Statement of Business or Professional Activities.

It's your net self-employment income that matters for calculating your CPP obligation.

For example, having $80,000 deposited into your business account during the year doesn't necessarily mean you're paying CPP based on $80,000.

If you had $25,000 of deductible business expenses, your net business income would be substantially lower.

That's one reason keeping track of your business expenses matters — and why categorizing them properly against the T2125 lines is worth getting right.

Why CPP catches new sole proprietors by surprise

Employees rarely have to think about CPP.

It appears on every paycheque, their employer handles the calculations and remittances, and the employer pays its portion separately.

Self-employed individuals don't have that automatic system.

Instead, CPP is calculated when you prepare your personal income tax return.

If you've been setting money aside based only on your expected income tax, you could find yourself with a larger balance owing than expected once CPP is included.

And because CPP contributions increase as your net self-employment income increases, the difference can become significant.

How much should you set aside for taxes?

There's no single percentage that works for every sole proprietor.

Your total tax bill can depend on your:

• net business income
• other sources of income
• province or territory
• available deductions and credits
• CPP contributions
• instalment requirements

Rather than assuming a particular percentage will cover everything, it's a good idea to estimate your tax position during the year — especially as your business grows.

After your first year, you may also be required to make income tax instalments depending on your circumstances.

Your bookkeeping matters more than you might think

To know your approximate tax bill and CPP obligation, you first need to know your business profit.

And to know your profit, you need to know what you earned and what you spent.

This is where many sole proprietors run into trouble at tax time.

Maybe you've been busy running your business and haven't kept your bookkeeping up to date. Now you have a year's worth of bank and credit-card statements and need to reconstruct your business activity before you can prepare your return.

If that's you, start with what to do when you haven't done your bookkeeping all year, and then our step-by-step guide to doing bookkeeping from bank statements.

That's exactly the problem Heightly was designed to help with.

Heightly takes your business bank and credit-card statements and organizes the transactions into suggested Canadian T2125 tax categories. You review the results, answer questions about transactions Heightly isn't confident about, and download an organized tax report and Excel workbook.

It doesn't calculate your CPP or prepare your tax return. Instead, it helps with the step that comes first: figuring out your business income and expenses.

You can see how it works for a Canadian sole proprietor before uploading anything.

Want to learn more about starting as a sole proprietor?

I recently contributed to Wagepoint's updated guide for Canadian sole proprietors, which covers some of the things new business owners need to know — including CPP, GST/HST registration and what changes when you hire your first employee.

Read Wagepoint's guide for Canadian sole proprietors →

And if tax time is approaching and your bookkeeping isn't done yet, don't panic. Getting your business transactions organized is the first step.

Have a year of business bank statements but no bookkeeping?

See how Heightly works →

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This article provides general information only and isn't tax or accounting advice. Tax rules depend on your individual circumstances. Consult a qualified tax professional or the Canada Revenue Agency for information specific to your situation. Quebec has separate Quebec Pension Plan (QPP) rules. CPP figures are for the 2026 contribution year as published by CRA and change annually.