Introduction

On November 4, 2025, the Government of Canada released its latest fiscal plan, Budget 2025: Building Canada Strong. The document outlines new tax measures, targeted incentives for business investment, and continued commitments to infrastructure and productivity growth.

 

This summary highlights key elements that may be of general interest to Canadians, including updates to tax rates, corporate initiatives, trust and compliance changes, and the broader economic context in which the budget was introduced.

 

Personal Tax and Credit Measures

Reduction to the First Federal Income Tax Bracket

The budget introduces a reduction in the lowest federal personal income tax rate from 15% to 14.5% beginning in 2025, and further to 14.0% in 2026 and subsequent years. To maintain fairness, a new mechanism will ensure that individuals claiming non-refundable tax credits are not adversely affected by the rate change.

 

Potential Implications: This measure slightly lowers taxes for income earners in the first bracket while maintaining the value of certain credits calculated at that rate.

 

Adjustments to Tax Credits

The budget removes the overlap between the Home Accessibility Tax Credit and the Medical Expense Tax Credit starting in 2026, meaning the same expense can no longer be claimed under both programs. It also introduces a new Personal Support Worker Tax Credit, offering a modest benefit for individuals working in eligible caregiving roles from 2026 through 2030.

 

Potential Implications: These updates refine the structure of existing credits and clarify how specific claims will be treated for future tax years.

 

Other Personal Tax Measures

The budget maintains existing Registered Retirement Income Fund (RRIF) minimum withdrawal rules and eliminates the Underused Housing Tax (UHT) as of the 2025 tax year.

 

Potential Implications: Retirement income and property taxation frameworks remain largely unchanged, while property owners previously affected by the UHT will see relief beginning in 2025.

 

Business and Corporate Measures

Immediate Expensing for Eligible Assets

Businesses will be permitted to claim 100% immediate expensing on the cost of new buildings used primarily for manufacturing and processing, provided they are acquired after November 4, 2025, and brought into use before 2030. The deduction rate will gradually decline thereafter.

 

Potential Implications: This supports near-term business investment and capital formation, particularly in sectors linked to production and infrastructure.

 

Expansion of Critical Mineral Incentives

The definition of “critical minerals” eligible for the existing exploration tax incentive has been broadened to include several additional resources.

 

Potential Implications: This change may encourage exploration and development activity in Canada’s mining and resource sectors over the medium term.

 

Flow-Through Share and AMT Alignment

A previously proposed adjustment that would have expanded Alternative Minimum Tax (AMT) deductions for certain flow-through share expenses has been withdrawn.

 

Potential Implications: Investors and issuers in the resource sector will continue to operate under the current AMT framework.

 

Trusts, Reporting, and Administrative Changes

The 21-year deemed-disposition rule has been expanded to include indirect trust-to-trust transfers. Bare-trust reporting requirements have been deferred to 2026, and the Canada Revenue Agency has been granted authority to file basic returns for certain individuals when all required tax information is available through third-party sources.

 

Potential Implications: These measures reflect ongoing efforts to enhance reporting transparency and simplify administration for specific taxpayers.

 

Economic Outlook & Fiscal Overview

Fiscal Framework

The federal deficit for the 2025-26 fiscal year is projected at approximately $78 billion, representing about 2.5% of GDP. Over the medium term, deficits are expected to decline gradually, with the debt-to-GDP ratio stabilizing near 43% by the end of the decade.

 

Potential Implications: The budget maintains a balance between supporting near-term growth and preserving fiscal sustainability.

 

Economic Growth Projections

Real GDP growth in 2025 is expected to average just above 1%, reflecting subdued global demand, slower trade, and cautious household spending. Growth is projected to improve modestly through 2026 and 2027 as investment-related projects progress.

 

Potential Implications: The overall pace of expansion remains moderate, with productivity and capital investment identified as key long-term drivers.

 

Inflation and Interest-Rate Environment

Inflation has eased toward the Bank of Canada’s 2% target, and monetary conditions are expected to remain steady. The policy stance aims to balance price stability with continued economic support.

 

Potential Implications: Stable inflation and interest-rate conditions provide a more predictable environment for households, businesses, and long-term financial planning.

 

Business Investment and Productivity Initiatives

Budget 2025 places emphasis on strengthening private-sector investment, innovation, and infrastructure spending. New programs are intended to encourage capital formation, technology adoption, and job creation in strategic sectors such as clean energy, manufacturing, and critical minerals.

 

Potential Implications: These initiatives are designed to enhance Canada’s long-term competitiveness and resilience while supporting future productivity growth.

 

Risks and Uncertainties

The fiscal outlook remains subject to global economic conditions, trade dynamics, and the pace at which new investments translate into measurable output gains. Labour-market normalization, housing supply, and demographic shifts also remain important factors influencing medium-term growth.

 

Potential Implications: Economic forecasts continue to carry uncertainty, and fiscal performance will depend on broader global and domestic developments.

 

Broader Financial and Planning Context

From a structural perspective, the 2025 budget reinforces several ongoing themes:

• Encouraging business investment and capital formation through targeted incentives.
• Maintaining stability in personal tax rates while refining specific credits and compliance measures.
• Balancing fiscal sustainability with continued economic support.
• For households, professionals, and business owners, the combination of lower entry-level tax rates, refined credit structures, and expanded capital incentives reflects an environment focused on gradual, investment-driven growth rather than short-term stimulus.

 

Summary

The 2025 federal budget presents a cautious but constructive fiscal plan, emphasizing investment, innovation, and discipline. While many measures will take time to influence the broader economy, they collectively aim to foster productivity gains and maintain financial stability.

 

Connect with Us

For those interested in understanding how the 2025 federal budget may relate to their overall financial picture, our team at Pharus Wealth Advisory Group welcomes the opportunity to review the key changes in the context of your financial journey.

 

Visit: www.pharuswealth.ca