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Forecasting the upcoming budget: What can you expect?

Updated: September 23, 2025

At a glance

With economic uncertainty still looming, the federal government is tabling its budget on Nov. 4, 2025 instead of the traditional spring release. This article explores what may be on the horizon, with a focus on anticipated income tax measures that could impact individuals, families, and businesses across the country.

The current Minister of Finance and National Revenue Francois-Philippe Champagne recently confirmed that the federal government will be tabling a budget on Nov. 4, 2025. The federal budget is usually presented in the spring to coincide with the government fiscal year which ends on March 31. However, given the election timing of the current government, and the state of economic uncertainty in the country, the government determined that a fall budget should bring a bit more clarity to Canadians. What tax measures can you expect to be in the budget?

This article anticipates this year’s budget, including some important income tax items for Canadians.

Assessment of current situation

Since taking office, the government of Prime Minister Mark Carney has promised to:

  • Focus on growing Canada’s economy
  • Increase military spending
  • Remove barriers to inter-provincial trade
  • Find a way to address the housing crisis
  • Find ways to help the Canadian economy weather the U.S. tariff crisis, while reducing spending on regular government operations

More recently, Prime Minister Carney stated that the fall budget would be both an austerity and investment-focused budget. This statement was interpreted by Kevin Page, a former parliamentary budget officer, as signalling that a significant reallocation of government spending will happen under this budget. 

While nothing has been explicitly announced about increasing taxes to meet the goals, it is entirely possible that there will be tax increases to help to meet the spending priorities.

What can you expect with respect to new taxes?

Three people sit at a table with laptops as two people in the background have a discussion while looking at a tablet.

The GST rate was initially conceived at a rate of 9%, introduced in 1991 at a 7% rate. In 2006, the rate was reduced to 6% and further reduced to 5% in 2008. It is possible that there could be an increase in the GST rate to help address the increased spending. The C.D. Howe Institute published a 2025 shadow budget in which they estimate that an additional $30 billion in GST revenue could be raised annually by the 2029/2030 government fiscal year by implementing a 2% increase in the GST.

The party campaigned on a platform of a middle-class tax cut and put forward draft legislation in Parliament to implement this. Therefore, it is unlikely that there will be a general increase. However, the government may decide to tax top income earners at a higher rate by adding a tax increase that would affect the very wealthy. The current top federal tax rate in 2025 is 33%, but it has been higher in the past.

Back in 1975, the top federal personal income tax rate was 47%, which led to a combined federal and provincial tax rate in many provinces of over 60%. The top marginal personal tax rate before 1972 tax reform was 80%, levied on taxable income over the equivalent of $3 million in today’s dollars. Given that political outlooks can be driven by the impact of income taxes on middle-class voters, an ultra-high tax rate on income above a high threshold could be put forward.

The April 2024 budget planned to increase the tax inclusion rate applicable to capital gains as a revenue generating measure. This was not embraced well and eventually scrapped before becoming law. Mr. Carney stated in the spring that he would not be bringing back this type of tax increase. Canada levies a tax on the deemed disposition of certain assets on death. This includes capital property and also tax-deferred plans that do not pass to a spouse or common law partner. The U.S. imposes an estate tax at death, which is based on the value of assets at death. Also, several European countries (France, Spain, Norway and Switzerland) impose a wealth tax, based on the value of certain assets. Imposing a wealth tax or an estate tax could be another way to impose a tax that raises revenue but does not significantly affect the general voting public.

Any general increase in corporate tax rates will leave Canadian corporations at a competitive disadvantage to the U.S. and is therefore unlikely. However, an excess profits tax could be introduced, similar to the additional 1.5% tax imposed on banks and life insurers on taxable income over $100 million.

Increased taxes on corporations in specific industries are possible, but unlikely to be able to generate significant revenue, or like the scrapped Digital Services Tax, may not be palatable to international trading partners.

Reductions in government spending will likely be part of the proposed budget plan. In July, the Minister Champagne and Treasury Board President Shafqat Ali asked government cabinet ministers to find operational savings of 7.5% for the 2026-27 fiscal year, 10% in 2027-28 and 15% in 2028-29.

Investments in incentives to drive business growth

In the fall economic statement (FES), released on December 16, 2024, the government proposed to revitalize the Canadian Scientific Research and Experimental Development (SR&ED) program for Canadian businesses. These incentives were included in draft legislation released for comment on Aug. 15, 2025.

Consequently, it is expected the government will push ahead with increasing expenditure limits for qualifying expenditure, re-introducing eligible capital expenditures, and extending the enhanced and refundable SR&ED benefits currently only available to Canadian controlled private corporations to small Canadian public companies. For further details, refer to SR&ED program enhancements and updates: Draft legislation released.

Flow-through shares have traditionally allowed investors in resource companies to be entitled to tax deductions not claimed by the resource companies—the tax incentives are “flowed-through” to the investors. The 2025 Liberal platform proposed to create flow-through shares that would benefit investors in companies developing AI, or investing in quantum computing, biotech, or advanced manufacturing.

The 2024 FES also discussed creating a Canadian Patent Box regime. In general terms, a patent box refers a system of allowing a lower corporate tax on profits from the commercial exploitation of intellectual property developed by the corporation. This would help to keep the rewards of Canadian innovation in Canada and to discourage selling the intellectual property to an offshore entity.

The 2025 liberal platform also discussed reintroducing a tax incentive for home builders that was used in the 1970s, known as the Multi-Unit Rental Building (MURB) program. This program would be used to create new rental housing units. In the past, this program worked by creating a flow-through of deductible capital costs to investors

In the fall economic statement (FES), released on December 16, 2024, the government proposed to revitalize the Canadian Scientific Research and Experimental Development (SR&ED) program for Canadian businesses. These incentives were included in draft legislation released for comment on Aug. 15, 2025.

Consequently, it is expected the government will push ahead with increasing expenditure limits for qualifying expenditure, re-introducing eligible capital expenditures, and extending the enhanced and refundable SR&ED benefits currently only available to Canadian controlled private corporations to small Canadian public companies. For further details, refer to SR&ED program enhancements and updates: Draft legislation released.

Flow-through shares have traditionally allowed investors in resource companies to be entitled to tax deductions not claimed by the resource companies—the tax incentives are “flowed-through” to the investors. The 2025 Liberal platform proposed to create flow-through shares that would benefit investors in companies developing AI, or investing in quantum computing, biotech, or advanced manufacturing.

The 2024 FES also discussed creating a Canadian Patent Box regime. In general terms, a patent box refers a system of allowing a lower corporate tax on profits from the commercial exploitation of intellectual property developed by the corporation. This would help to keep the rewards of Canadian innovation in Canada and to discourage selling the intellectual property to an offshore entity.

The 2025 liberal platform also discussed reintroducing a tax incentive for home builders that was used in the 1970s, known as the Multi-Unit Rental Building (MURB) program. This program would be used to create new rental housing units. In the past, this program worked by creating a flow-through of deductible capital costs to investors

BDO can help

Federal budgets often bring changes that can pose risks or unlock new opportunities for businesses—shaping everything from financial strategy to market positioning. Your BDO advisor is available to discuss how any changes in the 2025 federal budget could affect future planning for your business.

Subscribe here to get the latest budget news when it's released—including what it means for Canadians, businesses, and the economy.

The information in this publication is current as of September 16, 2025.

This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.