The federal budget was released in November, and it contains several elements that could significantly impact your business and financial planning. Read below for 3 important aspects of the new budget.

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1. No increase in the capital gains inclusion rate

The 2025 federal budget was released in November 2025. Since 2000, the capital gains inclusion rate has remained at 50%. In simple terms, if you realize a $100 capital gain, $50 is included in taxable income.

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In the 2024 federal budget, the government proposed increasing the capital gains inclusion rate from 50% to two-thirds (2/3), with a $250,000 annual exemption for individuals. Under that proposal:

• Up to $250,000 of capital gains realized by an individual in a year would continue to be taxed at a 50% inclusion rate.
• Any capital gains above $250,000 would be subject to a 2/3 inclusion rate.
• The $250,000 exemption would apply only to individuals.
• Corporations and trusts would be subject to a 2/3 inclusion rate on all capital gains, with no exemption.

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This proposal was ultimately cancelled on March 21, 2025. However, there has been ongoing concern that the federal government might reintroduce the increase.

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The good news is that the 2025 federal budget did not revisit or reintroduce any increase to the capital gains inclusion rate.

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2. Elimination of the underused housing tax

The Underused Housing Tax (UHT) has been in effect since 2022. In general, if a residential property is owned by a non-resident, the owner is required to file a UHT return each year and may be required to pay UHT if the property was vacant or does not qualify for an exemption.

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The UHT legislation has gone through one major change:

• For 2022, many private corporations, trusts, and partnerships were required to file a UHT return even if no tax was payable. Many owners were unaware of this requirement, and the late-filing penalties were significant.
• For 2023 and later years, the filing obligation was narrowed so that, in general, only owners with non-resident involvement were required to file.

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The 2025 federal budget proposes to eliminate the UHT starting with the 2025 taxation year. This means:

• No UHT will be payable for 2025 and later years, and
• No UHT returns will be required for those years.

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Taxpayers who may have outstanding UHT filing or penalty issues are encouraged to seek professional tax advice.

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3. CRA automatic tax filing for certain taxpayers what certain individuals

The 2025 federal budget also proposes a new automatic tax filing regime, starting in 2026, to help certain individuals access benefits that are only available after a tax return is filed.

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Under this proposal, the CRA may automatically file a tax return for an individual if certain conditions are met, including:

1. The individual’s taxable income is below the federal basic personal amount, plus the age amount and disability amount, where applicable.
2. The CRA has information for all of the individual’s income for the year. For example, individuals with self-employment income are unlikely to qualify, as the CRA would not have complete income information.
3. The individual has not filed a tax return in at least one of the preceding three taxation years and has not filed within 90 days after the filing deadline.

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The CRA may introduce additional criteria. Before filing a return on an individual’s behalf, the CRA will notify the individual. If the individual does not respond or object, the CRA may proceed to file the return automatically.

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Individuals should continue to file their tax returns on a timely basis. CRA’s automatic tax filing is intended as a safety net to help vulnerable or disengaged individuals access benefits and should be viewed as a last resort, not a substitute for proper tax compliance.

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You can check out my interview on Omni News Mandarin where I discuss these important changes at length.