Ottawa [Canada], May 15 (ANI): Following the unveiling of a new cabinet, Canada has announced a significant personal income tax cut as one of the government's top legislative priorities for the new parliamentary session. The proposal will see the lowest marginal personal income tax rate reduced from 15 per cent to 14 per cent, effective from July 1, 2025.

The measure is expected to benefit nearly 22 million Canadians. According to government estimates, two-income households could save up to USD 840 annually by 2026.

In a press release, Canada's Department of Finance said, 'Minister of Finance and National Revenue, Francois-Philippe Champagne, today announced one of the first orders of business on the government's legislative agenda for the new session of Parliament: tax relief for nearly 22 million Canadians, saving two-income families up to USD 840 a year in 2026.'

'Once legislated, the lowest marginal personal income tax rate will be reduced from 15 per cent to 14 per cent, effective July 1, 2025. This tax cut will help hard-working Canadians keep more of their paycheques to spend where it matters most. This measure is expected to deliver over USD 27 billion in tax savings to Canadians over five years, starting in 2025-26,' the release added.

Canadian Prime Minister Mark Carney emphasised that the tax cut will help hard-working Canadians keep more of their paychecks, with savings of up to USD 840 per year for families.

Sharing a post on X, Carney wrote, 'Canada's new cabinet met for the first time this morning. One of our first orders of business: a tax cut for the middle class. Starting July 1, hard-working Canadians will keep more of their paycheques.'

https://x.com/MarkJCarney/status/1922732808943923706

He added, 'Last month, Canadians called for change to bring down the cost of living and to put money back in their pockets. My government will be delivering that change--cutting taxes for the middle class and saving families up to USD 840 a year.'

Champagne emphasised the economic benefits of the new middle-class tax cut and said that this move would provide support amid ongoing economic challenges, including trade uncertainties.

'With today's middle class tax cut, we are setting the stage for economic growth by helping hard-working Canadians keep more of their paycheques to spend on the priorities that matter most to them. Every Canadian should be able to afford necessities, feel secure, and get ahead financially--and this tax cut will help them do just that. As Canadians continue to feel the impact of ongoing challenges, including trade and tariff uncertainties, they should be able to keep more of what they earn to help build a stronger future and a more resilient Canada,' Champagne said.

As per Canada's Department of Finance, income is reported and tax is calculated annually. To reflect a one-percentage-point cut in the lowest tax rate coming into effect halfway through the year, the full-year tax rate for 2025 will be 14.5 per cent, and the full-year rate for 2026 and future tax years will be 14 per cent.

The Canada Revenue Agency will update its source deduction tables for the July to December 2025 period so that pay administrators can reduce tax withholdings as of July 1. This means that, effective July 1, individuals with employment income and other income subject to source deductions could have tax withheld at 14 per cent. Otherwise, individuals will realise this tax relief when they file their 2025 tax returns in spring 2026.

The bulk of tax relief will go to those with incomes in the two lowest tax brackets (i.e., those with taxable income under USD 114,750 in 2025), including nearly half to those in the first bracket (USD 57,375 and below in 2025). (ANI)