CPP Contributions When Self-Employed in Canada

One of the biggest surprises for new freelancers in Canada is the CPP bill. When you are self-employed, you pay both the employee and employer portions of Canada Pension Plan contributions. That effectively doubles what you would pay as a salaried worker. Here is how it works, how to calculate what you owe, and how your business expenses reduce the amount.

How CPP Works for Self-Employed Individuals

As an employee, CPP contributions are split: you pay half and your employer pays the other half, each at a rate of 5.95% (for 2026). Your employer deducts your share from each paycheque and remits the combined amount to the CRA.

When you are self-employed, you are both the employee and the employer. You pay both halves, for a combined rate of 11.90% on your net self-employment earnings between the basic exemption and the annual maximum.

This is calculated on Schedule 8 of your personal tax return and the amounts owing appear on your Notice of Assessment.

If you live in Quebec, the rate is different. Quebec runs its own plan, the QPP, and the self-employed rate is 12.60% for 2026, not 11.90%. Every other figure on this page is shared between the two plans. See Quebec: the QPP instead below.

Key Numbers for 2026

Detail	Amount
Basic exemption	$3,500
Maximum pensionable earnings (YMPE)	$74,600
Employee contribution rate	5.95%
Self-employed combined rate	11.90%
Maximum annual CPP contribution (self-employed)	$8,460.90

Your CPP contributions apply to net self-employment earnings between $3,500 and $74,600. Earnings below the basic exemption are not subject to CPP. Earnings above the YMPE are not subject to base CPP (but see CPP2 below).

CPP2: The Second Ceiling

Starting in 2024, the government introduced CPP2, a second tier of contributions that applies to earnings between the first ceiling (YMPE) and a second, higher ceiling called the Year's Additional Maximum Pensionable Earnings (YAMPE).

For 2026:

Detail	Amount
YAMPE (second ceiling)	$85,000
CPP2 employee rate	4.00%
CPP2 self-employed combined rate	8.00%
Maximum annual CPP2 contribution (self-employed)	$832.00

CPP2 only applies to the earnings band between $74,600 and $85,000. If your net self-employment income is below the first ceiling, CPP2 does not apply to you.

Quebec: the QPP Instead

If you were resident in Quebec on December 31, you contribute to the Quebec Pension Plan rather than the CPP, and you calculate it on the Quebec version of Schedule 8 (Quebec Pension Plan Contributions) rather than the one for the rest of Canada. On the Quebec return (TP-1), the QPP on self-employment income is calculated in Part C of Schedule U and carried to line 445. The plan works the same way and shares the same ceilings, but the rate is not the same, which is the part that catches people who read a national guide.

Detail	CPP (rest of Canada)	QPP (Quebec)
Employee rate	5.95%	6.30%
Self-employed combined rate	11.90%	12.60%
Maximum annual contribution (self-employed)	$8,460.90	$8,958.60
Basic exemption	$3,500	$3,500
YMPE / YAMPE	$74,600 / $85,000	$74,600 / $85,000
Second-tier self-employed rate	8.00%	8.00%

The QPP self-employed rate was 12.80% in 2025. Quebec cut the base plan from 10.8% to 10.6% for 2026 and left the additional plan at 2%, which is where 12.60% comes from. So a Quebec reader budgeting from last year's number will over-reserve slightly, and one budgeting from the CPP number will under-reserve by 0.7 points on up to $71,100 of earnings, about $498.

Quebec also has its own instalment threshold, covered below.

Combined maximum: If your net self-employment income exceeds $85,000, your total CPP and CPP2 contributions for 2026 would be approximately $9,292.90 ($8,460.90 base CPP + $832.00 CPP2).

How to Calculate Your CPP Contributions

Here is a step-by-step example.

Scenario: You earned $95,000 in gross freelance revenue and had $30,000 in deductible business expenses. Your net self-employment income is $65,000.

Step 1: Determine Pensionable Earnings

Net self-employment income: $65,000

Step 2: Subtract the Basic Exemption

$65,000 - $3,500 = $61,500

Step 3: Apply the Self-Employed Rate

$61,500 x 11.90% = $7,318.50 in base CPP contributions

Step 4: Check for CPP2

Since $65,000 is below the first ceiling of $74,600, CPP2 does not apply in this example.

Step 5: Tax Deduction for Employer Portion

Here is the good news: part of what you pay comes off your income. Schedule 8 splits your contributions in two. The deduction on line 22200 is half of the base contribution (the employer-equivalent portion) plus all of the first additional contribution (the extra 2 points that fund the enhancement) and all of any CPP2. In this example the base is $6,088.50 (9.9% of $61,500) and the first additional is $1,230.00 (2%), so $3,044.25 + $1,230.00 = $4,274.25 would reduce your taxable income.

The other half of the base contribution, $3,044.25, goes on line 31000 as a non-refundable tax credit instead. It reduces your federal tax at the lowest federal rate (14% for 2026), and you can claim a matching provincial or territorial credit.

How Business Expenses Reduce Your CPP

This is critical. CPP is calculated on your net self-employment income, not your gross revenue. Every legitimate business expense you claim on your T2125 reduces the income subject to CPP contributions.

Using the example above:

Scenario	Gross Revenue	Expenses	Net Income	CPP Owing
No expenses claimed	$95,000	$0	$95,000	$9,292.90 ($8,460.90 base + $832.00 CPP2)
$30,000 in expenses	$95,000	$30,000	$65,000	$7,318.50
$50,000 in expenses	$95,000	$50,000	$45,000	$4,938.50

Claiming that $30,000 in expenses saved roughly $1,970 in CPP alone ($9,292.90 minus $7,318.50), on top of the income tax savings. This is why tracking every deductible expense matters: it reduces both your income tax and your CPP bill.

Can You Opt Out of CPP?

No. If you are self-employed and between the ages of 18 and 70, CPP contributions are mandatory on your net self-employment earnings above the basic exemption. There is no voluntary opt-out.

However, there are two limited exceptions:

• Age 65 to 70: If you are receiving a CPP or QPP retirement pension, you can elect to stop contributing once you are 65. If you are self-employed only, you make this election on Schedule 8 of your tax return, not on Form CPT30 (CPT30 is for people who also have employment income). For 2025, the election must be made by June 15, 2027.
• After age 70: CPP contributions stop automatically. You cannot contribute past age 70.

If you are under 65 and self-employed, the contributions are not optional, including if you are already receiving a CPP or QPP retirement pension.

CPP and Partnerships

If you operate a partnership, each partner's share of the partnership's net income is subject to CPP individually. The partnership itself does not pay CPP. Each partner calculates their own contributions on Schedule 8 based on their allocated share.

Planning Tips

1. Set Aside CPP Money Monthly

Many freelancers are caught off guard by their CPP bill. Set aside part of every payment for income tax and CPP, and keep any GST/HST you collect in a separate pot, since it was never yours to spend. The CPP portion alone is roughly 12% of net self-employment income up to the first ceiling, and income tax comes on top at your own marginal rate.

2. Maximize Your Business Deductions

Since CPP is calculated on net self-employment income, every dollar of legitimate deductions saves you up to 11.90 cents in CPP contributions while your net income is below the $74,600 ceiling for 2026 (plus income tax savings).

3. Consider CPP as Forced Retirement Savings

Unlike income tax, CPP contributions build your future pension entitlement. The maximum CPP retirement pension for someone starting at age 65 in January 2026 is $1,507.65 per month. Higher contributions during your working years mean a higher pension later.

4. Quarterly Instalment Payments

If your net tax owing, CPP included, is more than $3,000 (or $1,800 in Quebec) this year and was above that amount in either of the two years before, the CRA expects you to make quarterly instalment payments. Failing to do so triggers interest charges, even if you pay the full amount at filing time.

FAQ

How much CPP do I pay as a self-employed person? Both halves. An employee pays 5.95% and their employer pays the matching 5.95%; self-employed, you are both, so the combined rate is 11.90% on net self-employment earnings between the basic exemption and the annual maximum.

What are the CPP numbers for 2026? A $3,500 basic exemption, a $74,600 maximum pensionable earnings ceiling (YMPE), a 5.95% employee rate, an 11.90% self-employed combined rate, and a maximum annual self-employed contribution of $8,460.90. Earnings below $3,500 are not subject to CPP.

What were the 2025 numbers? For the 2025 return, the YMPE was $71,300 and the YAMPE $81,200, giving a maximum self-employed contribution of $8,068.20 in base CPP and $792.00 in CPP2. The basic exemption and both rates were the same as 2026.

What is CPP2? A second tier introduced in 2024 that applies to earnings between the first ceiling (YMPE) and a higher second ceiling, the Year's Additional Maximum Pensionable Earnings. It sits on top of base CPP rather than replacing it, so higher earners contribute beyond the first ceiling.

Can I opt out of CPP if I am self-employed? No. Contributions on net self-employment earnings above the basic exemption are mandatory. Planning for them matters because, unlike an employee, nothing is withheld from your income during the year, so the full amount comes due when you file.

Sources

1. CRA CPP Contribution Rates, Maximums, and Exemptions
2. CRA Schedule 8 - CPP Contributions on Self-Employment Income
3. CRA CPP2 Additional Maximum Pensionable Earnings
4. CRA Line 22200 - Deduction for CPP or QPP Contributions on Self-Employment Income
5. CRA CPT30 - Election to Stop Contributing to CPP