Table of contents
TechNextPicks Editorial
Canada Edition
|
Issue: Feb 2026
T2125
GST/HST
QST (Quebec)
Expenses
Self-Employed Tax Guide Canada (2026): T2125, Expenses, GST/HST & QST
Last updated: February 14, 2026
Built for freelancers, contractors, Uber or taxi drivers, and side hustles who want a simple, Canada-first overview before tax time.
Author + review process
TechNextPicks Editorial Team
We review this guide on a quarterly cadence and update details when pricing or features change.
Last updated: February 14, 2026
Review cadence: quarterly
What we verify
- Pricing pages
- GST/HST + QST support
- Bank feeds
- Invoicing workflows
- Reporting exports
Reviewed & updated quarterly.
Introduction
How self-employed tax slips differ
Employees usually receive a T4 (Statement of Remuneration Paid) from an employer, and most tax slips like T4 and T4A are typically issued by the end of February.
If you earn business income, you may receive a T4A (Statement of Pension, Retirement, Annuity, and Other Income) from a client. Fees for services can appear on a T4A, and those amounts are reported on the self-employment lines of your return.
The CRA encourages self-employed people to use Form T2125 to report business income and expenses. The form helps calculate gross and net income, which you then use to complete your T1 return.
Keep supporting records such as invoices, receipts, bank deposits, and contracts so you can substantiate your income.
What you will capture on T2125
- Your sources of business income and a brief business description.
- Industry and activity details, including online business activity if applicable.
- GST/HST collected or paid where relevant.
- Expenses incurred to earn business income.
The CRA can apply penalties for repeated failure to report income. One part of the penalty calculation can be 10% of the amount not reported, subject to CRA rules and exceptions.
Planning tip (rule of thumb)
Some guides suggest setting aside around 25%–30% of self-employment income for taxes and CPP/QPP, but the right amount varies by income, province, deductions, and whether you are registered for GST/HST. This is general guidance, not tax advice.
If you only read one part
Quick answers for self-employed tax prep
- The T2125 is the common form used to summarize self-employed business income and expenses.
- Deductible expenses are typically reasonable costs you paid to earn business income.
- GST/HST and QST registration can matter once you cross threshold concepts or choose to register early.
General info only.
Who this guide is for
Use the scenarios below to find the closest match to your work.
Freelancer
Typical income: client invoices and retainers.
Typical expenses: software, home office, subscriptions.
Common mistake: mixing business and personal spending.
Contractor
Typical income: project fees and milestones.
Typical expenses: tools, travel, equipment.
Common mistake: forgetting to track GST/HST.
Gig driver
Typical income: platform payouts and tips.
Typical expenses: fuel, mileage, vehicle costs.
Common mistake: missing mileage or fee records.
Small side business
Typical income: sales, services, marketplaces.
Typical expenses: supplies, marketing, shipping.
Common mistake: waiting until tax season to organize.
T2125 explained
The T2125 (Statement of Business or Professional Activities) is commonly used to summarize your self-employed income and expenses on your Canadian tax return. It helps show your gross income, deductible expenses, and net income for the year.
What you need before you start
- Income records and invoices
- Receipts for business expenses
- Mileage or vehicle logs (if applicable)
- Bank or credit card statements
Important
Keep receipts and separate business and personal spending as much as possible. Clean records make your T2125 summary more accurate and easier to review.
CRA notes on T2125 expenses (high level)
- Claim reasonable current expenses to earn business income, and include only the business-use portion.
- Capital property is not claimed as a current expense on T2125.
- If you claim GST/HST input tax credits, reduce the expense by the ITC amount and record the net figure.
- Common categories include advertising, meals, insurance, interest/bank charges, office expenses, professional fees, rent, repairs, travel, utilities, and motor vehicle costs.
- Examples of non-claimable items include personal expenses, drawings to self/partners, and most fines or penalties.
Filing roadmap: self-employed taxes in Canada
This roadmap is for freelancers, contractors, and gig workers who want a clear, Canada-first filing flow. It is general information only and not tax advice.
Step-by-step checklist
- Gather records: income, receipts, bank statements, and mileage logs.
- Summarize income and expenses with basic bookkeeping.
- Complete the T2125 to report business income and expenses.
- Include your net income on your personal T1 return.
- Understand CPP/QPP contributions at a high level.
- Plan for installment timing and payment deadlines.
Video walkthrough (overview)
Video: Self-employed tax filing overview (YouTube). General info only.
Key dates (simple)
Self-employed filers typically have a later filing deadline than employees, but payment can still be due earlier. For many people, the return is due June 15 while any balance owing is due April 30. If a date falls on a weekend or holiday, the deadline moves to the next business day.
If the CRA determines you must pay in installments, they will notify you. Typical installment due dates are March 15, June 15, September 15, and December 15.
Stay organized like a pro
- Separate business and personal spending when possible.
- Track invoices and late payments.
- Keep digital copies of receipts.
- Run a monthly mini-close: reconcile banks and categorize expenses.
- Use accounting software year-round and tax software at filing time.
Best Tax Software in Canada
Use tax software to guide filing steps and keep submissions accurate.
Explore tax softwareBest Accounting Software in Canada
Use accounting software for year-round income and expense tracking.
Explore accounting softwareSelf-Employed Tax Installments Canada
Installments explained with planning tips and a risk checker.
Read the installments guideCPP vs QPP for Self-Employed
Planning-focused guide to CPP/QPP basics and cash flow.
Read the CPP/QPP guideSelf-Employed Vehicle Expenses Canada
Business-use rules, mileage logs, and proof to keep.
Read the vehicle guideCommon mistakes to avoid
- Waiting until the last week to organize receipts.
- Mixing personal and business expenses.
- Forgetting to track mileage or business-use portions.
- Missing sales tax obligations (GST/HST and QST in Quebec).
- Not setting aside money for taxes or CPP/QPP.
Self-Employed Filing & Payment Deadlines (Canada)
Filing due date: For self-employed taxpayers, the 2025 tax return must be filed by June 15, 2026.
Payment due date: Any tax owing for the 2025 year must be paid on or before April 30, 2026 to avoid interest or penalties.
Jan-Mar
Organize records
Collect slips, receipts, and bank statements.
Apr 30
Pay any balance due
Payment can be due before the filing deadline.
Jun 15
File your tax return
Submit your return by the self-employed deadline.
Pay early to avoid penalties.
Filing can be later than payment for self-employed. CRA important dates
CRA
Important dates
Filing and payment deadline details.
Open CRA page ->
CRA
T2125 form
Business income and expense reporting form.
Open CRA page ->
CRA
GST/HST registration
When to register and the threshold concept.
Open CRA page ->
Links are for reference only. Confirm details with CRA.
❌ Common Self-Employed Tax Mistakes
- ❌Mixing personal and business expenses: keep accounts separate for clearer records.
- ❌Not keeping receipts or mileage logs: missing documentation makes claims harder to support.
- ❌Waiting until the deadline to organize records: rushed filing increases errors.
- ❌Forgetting to estimate taxes quarterly: cash flow surprises are common without a plan.
- ❌Failing to register for GST/HST when required: watch the small supplier threshold concept.
- ❌Ignoring QST obligations in Quebec: Quebec sales tax rules can require separate tracking.
- ❌Relying solely on memory instead of organized books: consistent records reduce stress at tax time.
Educational information only — not tax advice.
📅 Year-Round Tax Organization System
Quarter 1
Track all income and categorize expenses.
Quarter 2
Reconcile bank records and file installment payments if needed.
Quarter 3
Review business thresholds (GST/HST/QST).
Quarter 4
Finalize records and prepare for T2125.
Good bookkeeping makes tax time easier. Explore accounting software tools to keep records tidy.
Self-Employed Tax Estimator (Canada)
Estimate your net income and plan a safe set-aside. General info only—this is not tax advice.
Choose your scenario
Examples are just for planning.
Examples are for budgeting and organization only. For tax decisions, use CRA/Revenu Québec resources or a professional.
General info only—this is not tax advice.
Estimator snapshot
Scenario
Custom
Province
Ontario
Income
CAD 0
Expenses
CAD 0
GST/HST
Not registered
QST
Not applicable
How to use this tool
- Pick a scenario or enter your own numbers.
- Use the set-aside range as a planning buffer, not an official tax estimate.
- Keep records year-round so filing is easier.
General info only - not tax advice.
Net income estimate
CAD 0
Income minus expenses. If expenses exceed income, net is shown as 0.
Suggested set-aside range
CAD 0 – 0
Based on a cautious level of 20–25% of net income.
Monthly set-aside planner
Pick a planning period to pace your savings.
| Period | Low | High |
|---|---|---|
| Monthly | CAD 0 | CAD 0 |
Save & resume
Save your progress and come back later.
General info only — not tax advice.
Reminders
-
T2125 is commonly used to report business and professional income and expenses.
T2125 form -
Self-employed filing deadlines can be later than most taxpayers, but payment can still be due earlier.
Important dates
What to prepare
- Receipts for business expenses
- Bank and credit card statements
- Invoice log (paid and unpaid)
Income & expenses overview
Gross income is the total you earned before expenses. Net income is what remains after eligible expenses are deducted. Most self-employed reporting focuses on net income.
Current expenses are day-to-day costs (like software or supplies). Capital expenses are longer-term assets (like equipment) that may be handled differently. Keep it simple and track what you spent and why.
| Common expense | Example |
|---|---|
| Home office | Workspace portion of rent or utilities |
| Vehicle | Business-use portion of fuel or maintenance |
| Software | Accounting, invoicing, or design tools |
| Marketing | Ads, website hosting, or printing |
Common expense categories (examples)
- Advertising and marketing (ads, flyers, website design).
- Vehicle expenses for business use (fuel, maintenance, insurance, parking, lease payments).
- Banking and financing costs (business account service charges, loan interest, brokerage fees).
- Office supplies and business software (pens, paper, tools used for work).
- Phone and utilities for business use (mobile plan, internet, portion of home utilities).
- Professional fees and dues (accounting, legal, memberships, industry subscriptions).
- Travel related costs (transportation, lodging, and meals where permitted).
Track the business-use portion and keep records to support your claims.
Expense checklist
Use these starter lists and track the business-use portion.
Vehicle & travel
- Mileage log (business-use portion)
- Fuel and maintenance receipts
- Parking and tolls for business trips
Home office basics
- Workspace measurements or rent portion
- Internet and phone (business-use portion)
- Office supplies and small equipment
Tools & subscriptions
- Accounting or invoicing software
- Industry tools and subscriptions
- Cloud storage or collaboration apps
GST/HST basics
GST/HST is a sales tax collected on certain goods and services in Canada. Self-employed people may need to register and collect GST/HST depending on their revenue and activities.
The small supplier threshold concept is important. If you cross the threshold, registration can become required. Rules can vary, so always confirm with CRA guidance.
Registration checklist
- Review recent revenue totals
- Confirm whether you cross the small supplier threshold
- Decide if voluntary registration makes sense
- Set up a system to track GST/HST collected
General info only. Confirm details with CRA.
Official resources
- CRA GST/HST registration guidance (placeholder)
- CRA small supplier threshold overview (placeholder)
- CRA remittance basics (placeholder)
Quick Method vs Regular Method
Regular method
Track GST/HST collected, subtract ITCs for eligible expenses, and remit the difference.
Quick method
Use a simplified remittance calculation based on eligible sales. It can reduce paperwork, but is not always better.
Which one is better? It depends on your expenses and ITCs. Consider professional advice before choosing.
Quebec QST + GST registration basics
In Quebec, businesses may need to register for both GST and QST. If your activities are in Quebec, track QST separately and follow Revenu Quebec guidance for registration and filing.
The $30,000 threshold concept can apply to GST and QST. If you cross the threshold, you may need to register for both.
Quebec checklist
- Confirm if your sales are in Quebec
- Check GST and QST registration requirements
- Track GST and QST separately in your system
- Review Revenu Quebec filing guidance
Common pitfalls
- Mixing GST and QST totals in one bucket
- Missing combined return steps
- Not keeping Quebec-specific records
Software picks
Tax software helps you file. Accounting software helps you track income and expenses year-round.
Best Tax Software in Canada
Compare filing tools, CRA support, and guidance features.
Explore tax softwareBest Accounting Software in Canada
Find the right bookkeeping tool for GST/HST and QST tracking.
Explore accounting softwareFAQ
Do I need to use the T2125 form?
If you have self-employed business income and expenses, the T2125 is commonly used to summarize your business results for your return.
What counts as a business expense?
Expenses that are reasonable and incurred to earn business income are typically deductible. Keep receipts and track the business-use portion.
Do I need a GST/HST number?
Registration depends on your sales and activities. Many people register after crossing the small supplier threshold, but rules can vary.
What about QST in Quebec?
Quebec businesses may need to register for both GST and QST and track them separately. Check Revenu Quebec guidance.
Quick Method vs Regular Method: what is the difference?
Regular method tracks GST/HST collected minus ITCs. The quick method uses a simplified remittance approach.
Which method is better for me?
It depends on your expenses and ITCs. A professional can help you choose the right method for your situation.
What is the small supplier threshold?
Canada has a small supplier threshold concept that can affect GST/HST registration. Review CRA guidance for current rules.
Do I need to separate business and personal accounts?
It is strongly recommended. Separation keeps your records clean and makes reporting much easier.
What software is best for self-employed people?
Use accounting software for year-round bookkeeping and tax software for filing. The best choice depends on your workflow.
How can I stay organized through the year?
Save receipts monthly, reconcile bank activity, and track mileage or home office use consistently.
Disclaimer
Affiliate disclosure: Some links may be affiliate links. We may earn a commission at no extra cost to you.
General information only. This guide is not tax or financial advice.
Always confirm requirements with CRA and Revenu Quebec guidance or a qualified accountant before making decisions.