On 18 February 2025, Nova Scotia Minister of Finance and Treasury Board John Lohr tabled the province's fiscal 2025-26 budget. The budget contains several tax measures affecting individuals and corporations.

The minister anticipates a deficit of CA$697.5m for 2025-26 and projects deficits for each of the next two years, with a return to budgetary balance in 2028-29. (Note: Balances are presented before contingency for the potential impact of unanticipated changes in economic growth, revenues, or expenses, mainly resulting from tariffs that could be imposed by the United States on Canadian goods.)

A brief summary of the key tax measures follows.

Corporate income tax rates

No changes are proposed to the general corporate income tax rate; however, effective 1 April 2025, the small-business tax rate will be reduced from 2.5% to 1.5%, and the small-business limit will be increased from CA$500,000 to CA$700,000.

Nova Scotia's current and proposed 2025 corporate income tax rates are summarized in Table A.

Table A — 2025 Nova Scotia corporate income tax rates¹

¹ The rates represent calendar-year-end rates unless otherwise indicated.

² The federal corporate income tax rates for manufacturers of qualifying zero-emission technology are reduced to 7.5% for eligible income otherwise subject to the 15% federal general corporate income tax rate or 4.5% for eligible income otherwise subject to the 9% federal small-business corporate income tax rate. These reductions are not reflected in the combined federal and Nova Scotia rates above.

³ Id.

⁴ An additional tax applies to banks and life insurers at a rate of 1.5% on taxable income (subject to a CA$100m exemption to be shared by group members).

Personal income tax rates

The budget does not include any changes to personal income tax rates.

The 2025 Nova Scotia personal income tax rates are summarized in Table B.

Table B — 2025 Nova Scotia personal income tax rates

¹ Individuals resident in Nova Scotia on 31 December 2025 with taxable income up to CA$15,100 pay no provincial income tax due to a low-income tax reduction. The low-income tax reduction is clawed back for income exceeding CA$15,100 until the reduction is eliminated, resulting in an additional 5% of provincial tax on income between CA$15,101 and CA$21,000.

For taxable income exceeding CA$154,650, the 2025 combined federal-Nova Scotia personal income tax rates are outlined in Table C.

Table C — Combined 2025 federal and Nova Scotia personal income tax rates

¹ The rate on capital gains is one-half the ordinary income tax rate.

² The federal basic personal amount comprises two elements: (1) the base amount (CA$14,538 for 2025) and (2) an additional amount (CA$1,591 for 2025). The additional amount is reduced for individuals with net income exceeding CA$177,882 and is fully eliminated for individuals with net income exceeding CA$253,414. Consequently, the additional amount is clawed back on net income exceeding CA$177,882 until the additional tax credit of CA$239 is eliminated; this results in additional federal income tax (e.g., 0.32% on ordinary income) on net income between CA$177,883 and CA$253,414.

Personal tax credits

Effective for the 2025 tax year:

• The maximum basic personal amount, spouse or common-law partner amount, and eligible dependent amount will be CA$11,744 for all eligible individuals. Currently, the additional CA$3,000 (i.e., added to the basic amount of CA$8,744) is only available for individuals with taxable income of CA$25,000 or less. The reduction provision for individuals with taxable income between CA$25,000 and CA$75,000 will be removed.

The age amount will increase from CA$4,269 to CA$5,734 for all eligible individuals. The reduction provision for individuals with taxable income between CA$25,000 and CA$75,000 will be removed.

Harmonized sales tax (HST)

As previously announced on 23 October 2024, the province will reduce the provincial portion of the HST from 10% to 9%, resulting in a new combined HST rate of 14%, effective 1 April 2025. (See EY Global Tax Alert, Nova Scotia to reduce Harmonized Sales Tax by 1% in 2025, dated 25 October 2024.)

Other tax measures

Effective 1 April 2025, the province's nonresident deed transfer tax rate will be increased from 5% to 10% for transactions with an Agreement of Purchase and Sale dated from 1 April 2025 onward.

For up-to-date information on the federal, provincial and territorial budgets, visit ey.com/ca/Budget.