On the road to a better retirement for self-employed people

If you’re self-employed, you wear two hats – that of an employer and an employee. You likely don’t have a company pension plan and must rely on your own initiative to fund your retirement. New changes to the Canada Pension Plan (CPP) will help you build a more financially secure retirement.

The CPP is being enhanced and the first step begins January 1, 2019.  Most working Canadians will start investing slightly more in the CPP for higher CPP benefits when they retire. Once it is fully mature, the enhancement will increase the maximum retirement benefit by about 50%.

As a self-employed individual, you will experience an increase in the contribution rate from 9.9% to 11.9% over the span of 7 years. Although you will need to budget more for the higher contributions, you will get some help at tax time. When you file, you can claim a tax deduction for contributions made on the additional employee contribution.

The Canada Revenue Agency will update its payroll deduction tables and formulas to help you plan. Your 2019 T1 tax return package will also be updated to include information about the enhancement. If you file electronically using commercial tax software that is certified for NETFILE, or have a tax preparer complete and file your return using EFILE, no changes in the filing process are required.

You can find more information, including tables, formulas and other resources that will help you online at canada.ca/cpp-enhancement-self-employed.

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