Ontario's 2025 Fall Economic Statement, released November 6, 2025, told businesses directly where to look for the province's next move on corporate tax: "an update on the Tax Action Plan will be provided in the 2026 Ontario Budget." That budget has not been tabled yet as of this writing, but it is expected within weeks, and it is the document that will confirm whatever comes next for Ontario's small business tax rate and related measures. For Toronto-area CCPCs, late March is also when most calendar-year corporations are making their first quarterly instalment payment of the year — which puts budget uncertainty and instalment planning on the same calendar page. Here is what is already confirmed, what is still pending a Budget announcement, and how to handle a Q1 instalment estimate sensibly while you wait.
What the Fall Economic Statement actually promised
Ontario's annual budget cycle runs on two documents: the spring Budget and the fall update. The November 6, 2025 Fall Economic Statement was explicit that it was not the vehicle for broader tax policy changes — it deferred that to the 2026 Budget.
That phrasing matters for a Toronto owner-manager trying to plan ahead: it signals that further changes to the small business tax environment are coming, but it does not commit to a specific rate, threshold, or effective date. Anything reported elsewhere as a confirmed 2026 Budget number should be checked against the Budget document itself once it is tabled, not assumed from pre-Budget commentary.
What is already settled, independent of the Budget
A few pieces of the small business tax picture are already fixed and do not depend on what the 2026 Budget contains:
| Measure | Status | Effective |
|---|---|---|
| Ontario small business limit | Unchanged | Remains $500,000 |
| Federal small business limit | Unchanged | Remains $500,000 |
| Ontario general CIT rate | Unchanged | 11.5% (26.5% combined with the federal rate) |
| Ontario HST | Unchanged | 13%, recoverable by HST registrants |
Both the Ontario and federal small business limits stay at $500,000 heading into the Budget — there is no separate provincial band above the federal ceiling to plan around. What is expected in the 2026 Budget is a cut to the Ontario small business rate itself, from 3.2% to 2.2%, which the pre-Budget commentary has flagged as taking effect partway through 2026 rather than retroactively to January 1. Until the Budget bill is actually tabled and passed, treat that rate as proposed, not confirmed — a Toronto CCPC should not adjust its instalment base on the expectation alone. See our Ontario corporate tax guide and small business deduction limit guide for how the federal and provincial limits interact.
Why this matters for your Q1 instalment
The Canada Revenue Agency requires most corporations expecting more than $3,000 in total tax payable to pay instalments through the year rather than a single amount at filing time — monthly for most corporations, quarterly for eligible small CCPCs with a clean compliance history.
Source: Canada Revenue Agency — When your corporation has to pay instalments.
For a calendar-year Toronto CCPC on quarterly instalments, the March 31 payment is the first of 2026. Whatever the 2026 Budget confirms about the small business rate itself will not change your March 31 obligation retroactively, but it can change what the rest of the year's instalments should be based on — which is exactly why it is worth building the estimate on a method that is easy to revise, rather than one that locks in an assumption you may need to unwind in a few weeks.
CRA gives corporations three ways to calculate the instalment base:
| Method | How it's calculated | Best fit for |
|---|---|---|
| No-calculation option | CRA uses the prior year's assessed tax (or the two years before, if the prior year isn't assessed yet) | Corporations with stable, predictable income |
| Prior-year option | You estimate based on the prior year's tax, adjusted for known changes | Corporations that know something changed but can still anchor to last year's actual numbers |
| Current-year option | You estimate the current year's tax directly | Corporations with a reliable current-year forecast, including a known rate or threshold change |
Source: Canada Revenue Agency — Calculating instalment payments.
A Toronto CCPC on the no-calculation option is basing its Q1 instalment on a 2025 year taxed at the old 3.2% Ontario small business rate — which is the correct base for a payment due before any rate cut is even law. The risk runs the other way: switching early to the current-year option and guessing at a 2.2% rate that has not yet received Royal Assent, or applying it to income earned before the eventual effective date, would understate the instalment. Once the Budget bill passes, the reduced rate will apply only to the portion of the year on or after its effective date, so the correct fix at that point is a blended rate for the year, not a flat 2.2% substituted for 3.2%. Run the numbers through our corporate tax calculator before finalizing the Q1 payment.
What to do about the parts that are still pending
For anything the 2026 Budget has not yet confirmed — most notably any further move on the small business rate itself — the sensible approach is not to bake a guess into your Q1 instalment base. CRA lets corporations switch calculation methods between instalment periods, so there is no cost to waiting for the actual Budget numbers before adjusting a mid-year instalment, and a real risk to acting on a rate or date that turns out to differ from what is tabled.
What Toronto-area CCPCs should do now
- Base your Q1 instalment on the current 3.2% Ontario small business rate on the $500,000 limit — nothing about the rate or the limit has changed as of this filing.
- Avoid building an assumed rate change into your instalment base until the 2026 Budget bill is actually tabled and passed, not on pre-Budget commentary.
- Check which instalment calculation method is being used — no-calculation, prior-year, or current-year — and whether it still reflects your 2026 income trajectory.
- Revisit the instalment base once the Budget bill passes, and if it confirms a mid-year rate cut, use a blended rate for the days before and after the effective date rather than a flat replacement rate.
- Keep your bookkeeping or payroll provider in the loop on whatever the Budget confirms — a bookkeeping and payroll provider working from stale defaults is a common source of instalment drift.
Key takeaways
- The 2025 Fall Economic Statement (November 6, 2025) explicitly deferred broader small business tax changes to the 2026 Ontario Budget, which has not been tabled as of this writing.
- The Ontario and federal small business limits both remain $500,000 — no legislated increase is in force, and none should be assumed for instalment purposes.
- A calendar-year Toronto CCPC on quarterly instalments makes its first 2026 payment on March 31, still on the existing 3.2% Ontario small business rate.
- Do not build an assumed rate change into your instalment estimate before the Budget bill confirms it — CRA allows switching calculation methods mid-year at no cost.
- Once a mid-year rate cut is confirmed, remember it will need to be prorated by days for the affected fiscal year rather than applied as a flat rate for the whole year.
If your Q1 instalment base needs checking, or you want your 2026 instalments reviewed once the Ontario Budget is actually tabled and passed, RN Canada works with Toronto-area CCPCs remotely on corporate tax planning from our Edmonton and Vancouver offices.