Ontario's 2026 Budget: Small Business Tax Cut, New-Home HST Relief, and Other Changes

Ontario tabled its 2026 Budget, A Plan to Protect Ontario, on March 26, 2026. There are fewer tax changes than in the federal measures this year, but a few of them matter a lot for incorporated business owners and anyone buying a newly built home.

The short version

Small business corporate tax rate: cut from 3.2% to 2.2% on July 1, 2026.
Non-eligible dividend tax credit: Ontario's rate drops on January 1, 2027, so dividends paid out of small business income will carry a bit more personal tax.
HST relief on new homes: up to $80,000 of the provincial HST back for agreements signed from April 1, 2026 to March 31, 2027, for all eligible buyers, plus a new provincial payment of up to $50,000 toward the federal portion (CRA Notice 346).
Ontario Trillium Benefit: the lump-sum payment threshold rises from $360 to $500, starting with the 2026 to 2027 benefit year.
Regional Opportunities Investment Tax Credit: ends for expenditures after 2026.

1. The small business rate cut

Up to $500,000 of active business income earned by a Canadian-controlled private corporation (CCPC) qualifies for Ontario's small business rate. The 2026 Budget cut that rate from 3.2% to 2.2% effective July 1, 2026.

Combined with the 9% federal small business rate, eligible income is now taxed at 11.2% for a full year, down from 12.2%. If your corporation's tax year straddles July 1, 2026, the cut is prorated by days. A calendar-year corporation gets the lower rate for 184 of the 365 days in 2026.

2. The dividend tax credit trade-off

Canada's tax system aims for integration: the combined corporate and personal tax on income earned through a corporation should roughly match the tax you'd pay earning it personally. When the corporate rate drops, the dividend tax credit is adjusted to keep things in line.

Ontario's small business (non-eligible) dividend tax credit rate falls from 2.9863% to 1.9863% on January 1, 2027. Money left in your corporation is taxed less, but non-eligible dividends you pay yourself from 2027 on will carry slightly more personal tax.

Worth considering before December 31, 2026: if you were already planning to pay yourself non-eligible dividends soon, paying some in 2026 instead of early 2027 may reduce your personal tax. It's not a reason to pull out cash your company needs, and it interacts with your salary versus dividend mix, RRSP room, and CPP. Run the numbers first. Our corporate tax support team can model it for you.

3. HST relief on new homes

Ontario is temporarily enhancing its HST New Housing Rebate and New Residential Rental Property Rebate to remove the full 8% provincial portion of HST on qualifying new homes. The CRA's GST/HST Notice 346 sets out the rules:

Valued up to $1 million: up to $80,000 back
$1 million to $1.5 million: the $80,000 maximum is maintained
Above $1.5 million: the maximum declines gradually, down to the regular $24,000 at $1.85 million and up
Timing: agreement with the builder signed from April 1, 2026 to March 31, 2027, construction started by December 31, 2028, and the home substantially completed by December 31, 2031 (for owner-built homes, construction must start in that same window)
Help with the federal portion too: buyers who qualify for the enhanced rebate may also get the new Ontario New Home Affordability Payment, worth up to $50,000 toward the 5% federal portion of HST and reduced by any federal rebate you receive

Ontario also proposes ending its regular new housing and rental property rebates after the enhancement period, with details expected in the fall 2026 economic statement. Our full guide covers the federal first-time home buyers' rebate and Ontario's HST relief.

4. Ontario Trillium Benefit paid upfront more often

The Ontario Trillium Benefit combines the Ontario Energy and Property Tax Credit, the Northern Ontario Energy Credit, and the Ontario Sales Tax Credit. When your annual entitlement is small, it's paid as one lump sum at the start of the benefit year instead of monthly. The 2026 Budget set out an increase in that threshold from $360 to $500, starting with the July 2026 to June 2027 benefit year. Your total benefit doesn't change, only how it's paid.

5. Regional Opportunities Investment Tax Credit ends

The Regional Opportunities Investment Tax Credit (ROITC), which supported investment in certain regions of the province, expires effective January 1, 2027. Eligible expenditures incurred on or before December 31, 2026 still qualify. If you were planning a qualifying investment in an eligible region, timing now matters.

Other measures

The budget also simplified beer, wine and spirits taxes for products sold in producer stores, and lets funded benefit plans elect to be treated as unfunded plans for Ontario's insurance premium tax.

Sources

Running an Ontario corporation? Book a consultation and we'll look at how the new rates affect the way you pay yourself.