OTTAWA – Prime Minister Mark Carney has announced the implementation of a new middle-class tax cut, set to take effect on Canada Day. The tax cut will benefit an estimated 22 million Canadians, with two-income families saving up to $840 annually, according to the federal government.
The announcement marks one of the first major economic moves from Carney’s new government, fulfilling a key campaign promise to ease the cost of living for working Canadians.
Tomorrow, on Canada Day, your middle-class tax cut takes effect — saving you money so you can keep more of what you earn.
— Mark Carney (@MarkJCarney) June 30, 2025
François-Philippe Champagne, Minister of Finance and National Revenue, added that the measure comes at a crucial time for Canadians coping with inflation and global economic uncertainty.
“This is about fairness – and about building a stronger economy that works for everyone,” Champagne said. “We’re making life more affordable and supporting the financial security of families across the country.”
Key Changes and What It Means for Canadians
The tax cut reduces the lowest personal income tax rate to 14 percent starting July 1, 2025. Because income is calculated on an annual basis, the effective full-year rate for 2025 will be 14.5 percent, before settling at 14 percent permanently in 2026 and beyond.
The bulk of the savings will benefit Canadians with taxable incomes under $114,750 — particularly those in the lowest income bracket (earning up to $57,375). Nearly half of the tax savings will go to individuals in this first bracket.
To ensure the savings reach workers immediately, the Canada Revenue Agency has updated its source deduction tables so that tax withholdings from paycheques will decrease as of July 1. Individuals with employment or other taxable income will see lower deductions and higher take-home pay without needing to wait until filing their 2025 tax returns.
A Broader Economic Agenda
The tax cut is part of the new federal government’s broader agenda to address affordability, increase fairness, and build what Carney described as “one Canadian economy – the strongest in the G7.”
In addition to reducing taxes, the government has pledged to bring down everyday costs, keep communities safe, and diversify Canada’s trade strategy.
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