As we enter 2025, British Columbia’s tax landscape continues to evolve. In this post we’re going to take a look at the key personal and corporate tax changes that will impact BC businesses and individuals in the coming year and what you can do to prepare.

Personal Tax Changes for 2025

British Columbia Tax Reduction

The provincial BPA has increased to $12,932 for 2025, up from $12,580 in the previous year.

The BC tax reduction has been revised for 2025:

• Taxes payable will be reduced by up to $562 for individuals with annual income of $25,020 or less.
• A partial reduction is available for those with annual income between $25,020 and $40,807.
• The reduction decreases by 3.56% of income above $25,020, resulting in no reduction for annual incomes of $40,807 or more.

RRSP and TFSA Contribution Limits

• The RRSP dollar limit for 2025 has increased to $32,490.
• The TFSA annual contribution limit for 2025 is $7,000, bringing the total cumulative limit to $102,000 for those eligible since 2009.

Immediate Expensing for Capital Investments

While the ability to immediately expense most capital assets ended after 2023 for corporations, it still applies for unincorporated businesses (partnerships and proprietorships) for property acquired before 2025.  These businesses can claim a 100% first-year deduction on qualifying property purchases. This incentive aims to boost investments in modern infrastructure and technology.

Corporate Tax Changes for 2025

Clean Technology Incentives

Expanded investment tax credits (ITCs) are available for clean technology projects, including electric vehicle supply chains and clean hydrogen initiatives. These offer substantial tax savings for businesses investing in environmentally friendly technologies.

Digital Services Tax

A new digital services tax has been implemented for taxable revenues earned from January 1, 2022. This primarily affects businesses operating in the digital economy.

Tax Changes Affecting Both Individuals and Businesses

Canada Pension Plan (CPP) Contributions

For 2025, the CPP contribution rates and limits have been updated:

• The Year’s Maximum Pensionable Earnings (YMPE) is $71,300 (2024 – $68,500).
• A new second earnings ceiling, the Year’s Additional Maximum Pensionable Earnings (YAMPE), has been introduced at $81,200 for 2025 (2024 – $73,200).
• The base CPP contribution rate remains at 4.95%, with an additional 1% for the enhanced CPP.

Employment Insurance (EI) Premiums

For 2025, the EI contribution rates and limits have been updated:

• The Maximum Insurable Earnings is $65,700 (2024 – $63,200).
• The base EI contribution rate remains at 1.64% (2024 – 1.66%), with the employer’s portion being 1.4X the employee contribution.

Online Communication with CRA

Starting in spring 2025, the Canada Revenue Agency (CRA) will deliver most business correspondence through its online platform. This shift applies to both personal and business tax matters.

Property Tax Updates

The homeowner grant threshold for 2025 has increased to $2.175 million, ensuring the same percentage of BC homes remain below the threshold compared to 2024.

What You Can Do To Prepare

1. Review Tax Planning Strategies: With the adjusted tax brackets and thresholds, it’s crucial to review and potentially adjust tax planning strategies for both personal and corporate taxes.
2. Leverage Clean Technology Incentives: Businesses should explore opportunities to benefit from the expanded ITCs for clean technology investments.
3. Prepare for Digital Communication: Ensure CRA online accounts are set up and current to receive important tax-related communications.
4. Maximize Retirement Savings: Take advantage of the increased RRSP and TFSA contribution limits to optimize retirement savings and tax efficiency.
5. Stay Informed on Potential Changes: Keep abreast of any additional tax law changes that may be introduced throughout the year, particularly regarding capital gains inclusion rates and small business deductions.

By staying informed and proactive about these tax changes, BC businesses and individuals can better position themselves for financial success in 2025. As always, consulting with a qualified tax professional is recommended for personalized advice tailored to your specific situation.

Want to discuss how these tax changes might affect you? Book a free consultation.

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As small businesses gear up to file their 2023 tax returns, it’s important to know which deductions to look for. Knowing about common and new deductions can save money and reduce your ongoing tax burden.

Knowing the common deductible expenses and changes to the tax code can help you save money on your 2023 returns and plan for 2024 spending and tax obligations.

Common Small Business Tax Deductions

Businesses who qualify can take the Small Business Deduction. The Small Business Deduction is the most common deduction small businesses use.

The Canada Revenue Agency (CRA) lowers the overall tax rate for businesses that meet the following criteria:

• Based in Canada, though it may conduct business across borders
• Private corporation
• Less than $10 million in taxable capital employed in Canada, including shareholder equity, loans, advances, surpluses and reserves

The credit applies to the first $500,000 of taxable capital deducted from active business in Canada.

There are other common tax deductions small businesses can take. Tax-deductible expenses generally fall into one of three categories:

1. Items used exclusively in your business’s operations
2. Expenses incurred within the space in which you conduct business, such as utility costs in rented office space
3. Things used while conducting your business

Deductions Many Small Businesses Miss

• Start-up costs, including machinery, equipment and supplies, along with fees for legal advice or accounting services
• Marketing and advertising costs, such as business cards, flyers, trade show fees, or the cost of ads on Canadian television and radio shows
• Office supplies, such as pencils and pens, stamps, stationery and cleaning supplies
• Business supplies that your business uses to provide its goods and services
• Rent provided for the space you use for the business, including land and buildings
• Utility charges, such as heat and electricity, along with insurance, maintenance, mortgage insurance and property taxes
• Telephone and internet charges
• Home office expenses, for the percentage of your home that is used exclusively for your business

What You Can’t Claim

In addition to knowing what you can deduct, it’s smart to understand what expenses you can’t claim, including:

• Wardrobe and clothing
• Parking tickets and fines
• Commuting costs
• Club and gym membership fees
• Life insurance premiums

Alternative Minimum Tax Changes

There are many changes to 2023 tax returns that could apply to your small business and personal returns.

One of the most notable changes is to the alternative minimum tax law (AMT). The alternative minimum tax ensures that high-income taxpayers still pay a minimum amount of tax, even when their income includes sources that are tax-exempt.

The proposed changes to the AMT would shift the exemption from the first $40,000 of income, with the balance subject to a 15% tax rate, to the first $173,000 with the balance is taxed at a 20.5% rate. Most provinces have their own AMTs based on a portion of the federal AMT.

In addition, capital gains are now fully included in the AMT calculation at 100%, compared to the previous 80% rate. Additional trusts, including Graduated Rate Estates and Qualified Disability Trusts, are now eligible.

Capital gains on donated property are now taxed at 100%, while donations of securities or employee stock options are now taxed at 30%. Capital loss carryovers are now deducted at 50%, down from 80%.

Other deductions, including employment and moving expenses, are now deductible at 50% instead of 100%.

For business owners, the AMT changes could mean an increased tax liability for high-income individuals due to the change in the tax rate, donation rule changes, and potential exposure for those who receive stock-based compensation.

New Tax Rules for 2023 Returns

In addition to the changes to the AMT, here are some of the other changes that could apply to your small business and personal returns.

• Adjusted Tax Brackets. Due to the dramatic inflation rates in the past year, the federal government has changed the tax brackets, each with increased thresholds. The new brackets and tax rates are:
  • Up to $53,359 (15%)
  • Up to $106,716 (20.5%)
  • Up to $165,430 (26%)
  • Up to $235,675 (29%)
• Change to Home Office Deductions. During the COVID-19 pandemic, the federal government made it easier to claim home office deductions in the 2020-2022 tax years. However. The flat-rate method no longer applies, meaning taxpayers need to use the detailed method, which requires more documentation
• Basic Personal Amount (BPA) Change. The BPA is the income a person in Canada can earn without being subject to federal income tax. In 2019, the federal government announced that the BPA would increase annually until it reached $15,000 in 2023. However, the rate will be adjusted for inflation, with the 2024 level set at $15,705. There are also provincial BPAs that vary by province and territory
• Tax-Free Savings Account (TFSA) Dollar Increase. The TFSA limits continue to increase, from $6,500 in 2023 to $7,000 in 2024. Individuals can contribute to a TFSA as soon as they turn 18; any unused amounts from previous years can carry over
• Registered Retirement Savings Plan (RRSP) Limit Increase. The RRSP contribution limit increased in 2023 to $30,780, an increase of $1,570. Note that the RRSP contribution level is still capped at 18% of total income

Payroll Changes for 2024

• Employment Insurance (EI) Premium Increases. As of January 2024, the EI premium rate has been set to $1.66 per $100 of employee earnings, up from $1.63, and $2.32 per $100 for employers, up from $2.28. The maximum employee contribution is $1,049.12 plus an employer contribution of $1,468.77.
• Canada Pension Plan (CPP) Premium Increases. As of January 2024, the CPP premium rate remains at $5.95 per $100 of employee earnings with a matching employer contribution. The maximum employee contribution is $3,867.50 plus an employer contribution of $3,867.50. Self-employed individuals pay both portions on filing their personal tax returns. In addition, on earnings above $68,500 up to $73,200 there is an additional 4% contribution, plus employer portion, required as an enhanced CPP contribution.

When looking to save money on your tax returns, it’s a good idea to have a professional help with the preparation and planning. Tax laws are complicated and constantly changing.

Book a free consultation and get advice on how to make sure you aren’t missing out on deductions and paying more tax than you need to. .

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

For small business owners, reviewing financial statements is one of the key factors in whether the business succeeds. This is something that can be easy for small business owners to overlook. They pay attention to the day-to-day activities of their trade, dealing with customers, and creating their products.

Often, entrepreneurs and small business owners put off reviewing financial statements or wait to go over them with their accountants. But reviewing your financial statements on a regular, more frequent basis can help you spot trends and identify opportunities and issues early on.

Reading and understanding a financial statement is not as difficult as it appears. Learning the basics helps small businesses gather insights about their growth and how to improve. These insights allow business owners to make strategic decisions to scale their offerings for greater success.

According to the Small Business Association, the success rate of small business owners that only go over their financial reports yearly is only 25-35%. As high as 75% of those business owners will fail. At the same time, there’s a 95% success rate for business owners who go over their financial reports weekly.

Setting a Schedule to Review Financial Statements

Many business owners fall into the habit of only reviewing their financial statements once a year with their accountant. Some business owners do their accounting internally and only review statements when it’s time to report income, either quarterly or yearly.

This poses some serious risk because it’s impossible to accurately track business growth, profits, and losses without reviewing the information regularly. Paying attention to bank statements alone won’t provide a good overview of the business’s financial health.

Financial statements, though, can be intimidating. And that may be a big reason that any many small business owners put off reviewing them more often. But a few tips like the ones we shared in this post about how to read financial statements can make it much easier.

Information about each of the reports listed in the section below can help entrepreneurs choose the right reports, learn to compile them, and use them effectively. It’s also an excellent idea to work with a financial professional to determine the right reporting for the business and industry and ensure your financial statements are accurate. 

At Avisar Chartered Professional Accountants, our experienced team works directly with business owners to explain the type of reporting that is most useful for their industry and business model. We understand that our entrepreneurs have a passion and brilliance for their own industry. We cut out the jargon to make understanding and using financial statements simple and effective.

Financial Statements Business Owners Need to Review

Keeping a handle on bank statements is an important consideration for personal finance, but business health needs a more robust approach. Here are some of the financial statements that most businesses should be reviewing on a regular schedule (weekly or monthly). 

• Income Statement
• Balance Sheet
• Cash Flow Statement

We covered these statements in more detail in a post about judging a business’s health. Here, we’ll give a quick overview and tell you how often to review these statements in your business.

Income Statement

We advise that you look at your income statement once a month. For smaller businesses, looking at them quarterly may be sufficient, but you don’t want to push it longer than that.

An income statement is also called a Profit and Loss Statement. These are the same reports, and they might also be called a “P&L”. This statement shows the revenue a business generates from business or services, as well as the costs to generate that revenue. All the expenses and overhead of running a business are accounted for, as well as the income and actual profit.

Income statements are important because they clarify how much the company spends for each project or product, for a clear picture of the profit.

Balance Sheet

Balance sheets should be prepared and reviewed quarterly. Don’t wait a full year to review your balance sheet.

A balance sheet is an overview of the company’s current finances. It shows the assets, debts, and equity the company holds during that reporting period.

Cash Flow Statement

Cash flow statements should be reviewed frequently, on a weekly basis for most businesses. 

The cash flow statement is a report that shows all the data on incoming cash, or income the company receives, as well as the outflowing cash, or expenditures. The cash flow statement is an aggregate report. It includes all revenue streams tied to the business and is especially important for businesses that have multiple revenue streams.

How Business Owners Can Get a Handle on Their Books

For small business owners, the terminology surrounding financial reporting can be intimidating. However, putting off reviewing financial statements can hinder the business. There are numerous sources to learn the basics, and it’s highly advisable for small business owners to work with an expert to set up their reporting and review schedule.

For more on reading and understanding check out our Guide to Reading Financial Statements for Business Owners.

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Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.