Working for yourself brings freedom and extra administration. Ottawa's contractors, consultants, freelancers, and independent practitioners have to separate business records from personal spending and handle obligations an employer would otherwise cover.
Good systems make that work much easier. This guide covers the essentials: HST registration, deductible expenses, instalment payments, and capital cost allowance.
HST Registration: The $30,000 Threshold
In Ontario, the Harmonized Sales Tax (HST) rate is 13%. As a self-employed individual, you must register for an HST account with the CRA if your total taxable revenue exceeds $30,000 in any single calendar quarter or over four consecutive calendar quarters.
When to Register Voluntarily
Even if your revenue is below $30,000, voluntary registration can make financial sense if:
- Your clients are businesses that may recover some or all of the HST through input tax credits (ITCs), if eligible
- You incur significant HST on business purchases such as equipment, software, or supplies, and registration would let you claim eligible ITCs
- You plan to exceed $30,000 soon, so registering early would simplify the transition
Once registered, you must collect HST on all taxable supplies, file HST returns (typically annually for small businesses, though quarterly or monthly filing is available), and remit the net tax to the CRA.
Quick Method of Accounting
If your annual taxable revenue, including HST, is $400,000 or less, you may be eligible for the Quick Method. Instead of claiming most ITCs separately, you apply a remittance rate to HST-inclusive revenue. A rate of 8.8% applies to many service businesses with a permanent establishment in Ontario, but eligibility, exclusions, and rates depend on the business. The method can simplify bookkeeping; it does not guarantee a lower remittance.
Common Deductible Expenses
Self-employed individuals report business income and expenses on Form T2125 (Statement of Business or Professional Activities). The CRA allows you to deduct any expense that is reasonable and incurred to earn business income. Here are the categories Ottawa self-employed filers use most.
Home Office (Business-Use-of-Home)
Business-use-of-home expenses may be deductible if the workspace is your principal place of business, or if you use it only to earn business income and regularly meet clients there. Eligible costs can include a proportionate share of:
- Rent or mortgage interest (not the principal portion of mortgage payments)
- Property taxes
- Home insurance
- Utilities (electricity, heating, water)
- Internet service
- Maintenance and minor repairs
The deduction is calculated based on the percentage of your home's total area used for business. A 150-square-foot office in a 1,200-square-foot apartment represents 12.5% business use, and you would deduct 12.5% of each eligible expense.
If your home office expenses exceed your net business income for the year, the excess carries forward. You can claim it in a future year when your income is higher.
Vehicle Expenses
If you use your personal vehicle for business travel (not commuting), you can deduct a portion of:
- Fuel and oil
- Insurance
- Maintenance and repairs
- Licence and registration fees
- Lease payments (subject to a monthly cap) or interest on a car loan (subject to limits)
Self-employed vehicle expenses use actual eligible costs multiplied by the business-use percentage. Keep a log of the date, destination, business purpose, and kilometres for each trip, plus total kilometres for the year. Commuting from home to a regular place of work is generally personal travel.
A full-year logbook establishes the base year. In a later year, the CRA may accept a three-month sample if it is representative and the business-use percentage is within 10% of the base year. The per-kilometre allowance used for employees is not a flat self-employed vehicle deduction.
Supplies, Software, and Professional Development
Commonly deductible expenses include:
- Office supplies and stationery
- Software subscriptions (accounting, project management, design tools)
- Professional development courses and certifications
- Industry conferences and seminars (including travel)
- Professional association dues and memberships
- Business insurance (errors and omissions, general liability)
- Legal and accounting fees
Meals and Entertainment
Business meals and entertainment are deductible at 50% of the actual cost. This applies to meals with clients, prospects, or business associates where business is discussed. Keep detailed records including the date, attendees, business purpose, and receipt.
Quarterly Instalment Obligations
You may have to pay instalments if your net tax owing is more than $3,000 for 2026 and was also more than $3,000 in either 2025 or 2024. The threshold is $1,800 for Quebec residents. The key dates are March 15, June 15, September 15, and December 15.
How to Calculate Instalments
The CRA offers three methods:
- No-calculation method: Pay the amounts on your instalment reminder from the CRA. If every amount is paid in full and on time, instalment interest does not apply even if the final amount differs.
- Prior-year method: Divide your 2025 net tax by four and pay that amount each quarter.
- Current-year method: Estimate your 2026 net tax and divide by four. This may reduce overpayments when income drops, but interest can apply if the estimate is too low.
Underpaying instalments triggers instalment interest, calculated at the CRA's prescribed rate. Overpaying means your money sits with the CRA interest-free until your return is assessed.
For freelancers and consultants with variable income, the current-year method requires careful estimation. A mid-year projection can help keep the estimate aligned with actual revenue.
Capital Cost Allowance (CCA)
When you purchase a capital asset such as a computer, camera, vehicle, or piece of equipment, it is generally claimed over time through Capital Cost Allowance rather than deducted as a current expense.
How CCA Works
The class, base rate, cost limit, and first-year rules all affect the calculation. Office furniture is commonly Class 8, general-purpose computer hardware is commonly Class 50, and vehicles are usually Class 10 or 10.1. For a passenger vehicle acquired after 2025, the 2026 Class 10.1 threshold is $39,000 before tax. The deductible capital cost is limited even if the vehicle costs more.
Do not calculate CCA from a generic rate table alone. Current first-year incentives, available-for-use rules, mixed personal use, and prior additions can change the result. The CRA's current CCA class guidance is the starting point. CCA is optional, so you can claim less than the maximum.
When you sell or dispose of a capital asset, record the proceeds and original cost. Recapture or a terminal loss may arise depending on the class and the other assets left in it. Class 10.1 passenger vehicles have special disposal rules.
Business Number Registration
Every self-employed individual who needs to register for HST, payroll, or import/export accounts needs a Business Number (BN). You can register online through the CRA's Business Registration Online service, by phone, or by mail.
Your BN is a nine-digit number, and each program account (HST, payroll, corporate tax) adds a two-letter suffix and four-digit account number. For most sole proprietors, the HST account (RT0001) is the only one needed.
Registration is straightforward, but confirm the program accounts, reporting periods, and accounting method at the outset to avoid rework later.
Keep the Business Moving and the Records Current
Self-employment taxes require consistent records across HST, expenses, instalments, and capital assets. Keeping them current is far easier than rebuilding them at filing time.
Our tax compliance and tax preparation services are built for Ottawa's self-employed community. We handle the bookkeeping, instalment calculations, HST filings, and year-end T1 preparation so you can focus on the work that generates the revenue.