The federal budget is out, but what does it mean to you?

From lower tax rates to changes in trust planning, there are a number of changes that could impact your plans for your retirement.

Federal Personal Tax Rates:

The lowest bracket went from 15% to 14.5% as part of the 2025 “middle-class tax cut”. From 2026 and beyond it will be reduced to 14%.

Note: 2025’s 14.5% is a one-year blended rate because the cut to 14% starts July 1, 2025; from 2026 onward, the full year is 14%.

The complete federal tax brackets for 2025 are:

What this means for you: You should see a small reduction in federal tax in 2025, with a further modest decrease in 2026, especially in your total income, including items like RRIF payments, CPP, and investment returns, falls under $57,375 per year. 

A small note on changes to the Top-Up Tax Credit:

Lowering the lowest bracket rate also lowers the value of most non-refundable tax credits. In the 2025-2030 taxation years, the new, non-refundable Top-Up Tax Credit effectively preserves a 15% credit rate on the amounts of non-refundable credits that exceed the first-bracket threshold. 

What this means for you: It’s a safeguard to ensure no one pays more tax because of the lower lowest-bracket rate.

Home Accessibility Tax Credit:

The Home Accessibility Tax Credit (HATC) remains available for eligible accessibility home renovations (up to $20,000 of qualifying expenses per year, calculated at the lowest rate). Some renovation costs also qualify for the Medical Expense Tax Credit (METC), subject to legislation. 

Expenses incurred by December 31, 2025 can still be claimed under both credits for the same cost. After the end of 2025, expenses claimed under METC cannot also be claimed under HATC.

What this means for you: If you plan eligible renovations and want to maximize credits, complete the work by year-end 2025.

Trust planning:

Most trusts face a deemed disposition of capital property every 21 years. The rule was first introduced to prevent assets from being held indefinitely without triggering tax.

What changed? The anti-avoidance rule has been broadened to capture indirect transfers intended to sidestep the 21year rule. It’s effective for any transfers of property on or after November 4, 2025.

What this means for you: This further reduces the attractiveness of simple trusts as purely a tax-reduction mechanism, although there are still situations in which they may be the right tool for your family. If you’re involved with a trust approaching its 21 year anniversary, or considering setting up a new trust, review any rollover or restructuring plans and their tax implications with your tax and estate advisors.

The Underused Housing Tax (UHT) is canceled from 2025.

The UHT is gone starting with the 2025 calendar year; there will be no UHT payable and no UHT returns required for 2025 and later.

Obligations remain for 2022–2024, including filings, penalties, and arrears interest where applicable.

What this means for you: If you have property to which UHT applied, confirm you are compliant for 2022–2024; no filing required for 2025 onward.

RRIF minimums see no changes.

Despite prior political discussions about a temporary reduction, the budget does not change RRIF minimum withdrawal requirements.

What this means for you: Your current RRIF minimum withdrawals will remain in place. Talk to your advisor to help plan your withdrawals tax-effectively, bearing in mind that the overall tax rate applied will be slightly lower given the reduction in the first tax bracket rate.

Bare trust reporting is delayed to 2026.

Bare-trust reporting starts for taxation years ending on/after Dec 31, 2026. Bare trust rules often wrap in individuals who have not formally created a trust.

What this means for you: If you use or are considering a bare trust, prepare for reporting beginning with the 2026 taxation year. If you are not sure if you have a bare trust situation (e.g. you are a titleholder for property or an account owner for the benefit of someone else like an elderly parent), consult with your tax professional to determine your filing requirements.

What should you do next?

Assuming the budget is fully passed and implemented, it is a good idea to review your 2025–2026 income plans, and go through the list of which changes could affect your retirement plan.

If you would like a second opinion on your retirement plan or to discuss further, please feel free to reach out to us for a one-on-one consultation!