Plenty of businesses start on the side of a job. CRA treats the two separately on one return.
What you file
One personal return, with:
- your T4 from the job, as usual, and
- a T2125 for the business. See Enter your T2125 in tax software.
Why you may owe in April
Your employer takes tax and CPP off each pay, worked out for your job alone. Nobody takes anything off your business profit. The business profit is also added on top of your salary, so it's taxed at your highest rate.
The result: a bill at tax time, often bigger than people expect.
CPP
You pay CPP on your salary and on your business profit, up to a yearly maximum for the two together. If your job already pays the maximum, there is little or no CPP on the business. If it doesn't, you pay both the employee and employer share on the profit.
Three ways to avoid the bill
- Set money aside from every payment. The Set aside card on Home works out a share of your profit to keep.
- Ask your employer to take off more tax. On form TD1 there is a line for additional tax to deduct from each pay. It spreads the business tax over the year.
- Pay instalments if CRA sends you reminders. See Instalments.
The $30,000 GST/HST threshold
Only your business sales count toward the $30,000 GST/HST threshold, not your salary. See Do I need to register for GST/HST?.
A business loss
If the business loses money in a year, the loss reduces your total income, so you may get some of your job's tax back. It has to be a real business run to make a profit, with records. CRA looks closely at years of losses on what looks like a hobby.
Keep them apart
Use a separate account or card for the business if you can. If you can't, mark personal lines when you import your bank. See Business and personal in one account.
This is general information to help you keep your own records. It is not tax or legal advice.
Based on: CRA: Small businesses and self-employed income and CRA: TD1 personal tax credits returns
Last checked: 2026-10-25