Department of Finance Canada announced a planned reduction in the lowest federal personal income-tax rate.
Once legislated, the rate would fall from 15% to 14%, effective July 1, 2025. Because the change begins halfway through 2025, the effective rate for the first bracket would be 14.5% for the 2025 tax year before reaching 14% in 2026.
Finance Canada said the measure would provide tax relief for nearly 22 million Canadians and save two-income families up to $840 a year in 2026.
The department estimated the cut would deliver more than $27 billion in tax savings over five years, starting in 2025-26.
The bulk of the relief would go to taxpayers in the two lowest tax brackets. Finance Canada said nearly half of the relief would go to taxpayers in the first bracket, which applied to taxable income of $57,375 and below in 2025.
The department also said the rate used for most non-refundable tax credits would continue to match the lowest personal income-tax rate.
That credit-rate detail matters because a lower lowest-bracket rate can also reduce the value of many non-refundable federal credits. The rate cut lowers basic tax on income in the first bracket, while the credit-rate rule keeps the tax system internally aligned.
For households, the change is a broad personal-income-tax measure rather than a targeted benefit. Its effect depends on taxable income, family composition, and how much tax is otherwise payable.