Ontario Proposes $1.1 Billion Small Business Tax Cut to Boost Growth and Investment
Ontario Small Business Tax Cut Will Lower Rates and Support Over 375,000 Businesses
UXBRIDGE, ON — The Ontario government is proposing a $1.1 billion reduction in small business corporate income tax (CIT) as part of its 2026 Budget, aiming to support entrepreneurs, create jobs and strengthen the province’s economy.
If passed, the plan would lower the small business tax rate from 3.2 per cent to 2.2 per cent, representing a 31.25 per cent reduction over the next three years. The province says the move would benefit more than 375,000 small businesses, providing up to $5,000 in annual tax savings per business.
Supporting Small Businesses Amid Economic Uncertainty
Officials say the tax cut is designed to help businesses manage rising costs and navigate ongoing economic pressures, including global uncertainty and U.S. tariffs.
“Ontario’s small businesses are the driving force behind our economy, employing more than 2.5 million people,” said Associate Minister of Small Business Nina Tangri. “This additional tax relief will allow them to reinvest in their companies and workers so they can scale-up and grow.”
We are #ProtectingOntario‘s small businesses with the 2026 Ontario Budget!
Pleased to join Associate Minister of Small Business @ninatangri and the @burlingtoncofc Chamber of Commerce this morning to announce new measures from Ontario’s 2026 Budget to support small businesses… pic.twitter.com/5F7MFUasGf
— Effie Triantafilopoulos (@Effie_ONB) April 1, 2026
Part of Ontario’s Broader Tax Action Plan
The proposed cut builds on previous reductions to the small business tax rate, which was lowered from 3.5 per cent to 3.2 per cent in 2020, along with expanded eligibility in 2023.
The government says it will also align with federal measures that allow businesses to accelerate write-offs for capital investments, including equipment and other assets. These changes are expected to deliver an additional $3.5 billion in Ontario income tax relief over four years.
Finance Minister Peter Bethlenfalvy said the tax cut is intended to strengthen local economies.
“Today’s tax cut will put more money back into the hands of local entrepreneurs… giving them the flexibility to expand, hire and compete,” he said.
Economic Impact and Job Creation
Small businesses account for 98 per cent of all businesses with employees in Ontario and employ more than 2.5 million people, making them a critical component of the provincial economy.
Industry groups say the tax relief could translate into increased hiring, wage growth and business expansion.
Dan Kelly, President and CEO of the Canadian Federation of Independent Business, said many business owners plan to reinvest savings into their operations.
“It’s a win for businesses, people and the economy,” he said.
Additional Supports for Ontario Businesses
The tax cut is part of a broader package of support measures outlined in the 2026 Budget, including:
- Enhancements to the Ontario Made Manufacturing Investment Tax Credit (OMMITC)
- Continued reductions in fuel and gasoline taxes
- Increased Employer Health Tax exemption to $1 million
- Support through Small Business Enterprise Centres (SBECs)
In 2024–25, Ontario’s network of more than 50 SBECs helped start over 8,000 new businesses, expand 2,700 existing businesses and create more than 15,800 jobs.
Strengthening Ontario’s Economic Resilience
The province says the tax cut is part of its long-term strategy to build a competitive, resilient and self-reliant economy, particularly as businesses adapt to shifting global conditions.
Municipal leaders say the measure will provide meaningful support at the local level.
“By easing the tax burden, it gives small businesses the breathing room they need to manage rising operational costs and reinvest in our community,” said Dana Middleton, Chair of the Uxbridge Business Improvement Area.
For more updates on business, economic policy and job creation across Ontario, follow GTA Today.
