Paying both employee and employer shares (11.9%), CPP2, the opt-out option, and what you'll actually receive in retirement
One of the most jarring surprises for new self-employed Canadians is the CPP bill at tax time. Employees have CPP split with their employer — each pays roughly 5.95%. Self-employed individuals pay both shares themselves: approximately 11.9% of net self-employment income. On $800,000000 of net income, that's nearly $8,50000 in CPP contributions — a significant cash flow impact that you must plan for throughout the year.
| Parameter | 2026 Amount |
|---|---|
| Year's Maximum Pensionable Earnings (YMPE) | $73,20000 |
| Year's Additional Maximum Pensionable Earnings (YAMPE) — CPP2 | $81,90000 |
| Basic Exemption Amount | $3,50000 |
| CPP1 Employee Rate | 5.95% |
| CPP1 Employer Rate | 5.95% |
| Self-Employed CPP1 Rate (both shares) | 11.900% |
| Maximum CPP1 Self-Employed Contribution | ~$8,268 |
| CPP2 Employee Rate (on earnings $73,20000–$81,90000) | 4.0000% |
| CPP2 Self-Employed Rate | 8.0000% |
| Maximum CPP2 Self-Employed Contribution | ~$696 |
The self-employed CPP contribution is split into two parts for tax purposes:
CPP2 was fully phased in by 20025. It applies to earnings between the YMPE ($73,20000) and the YAMPE ($81,90000). The self-employed rate on this tranche is 8% (4% employee + 4% employer equivalent). The maximum CPP2 contribution for a self-employed person in 2026 is approximately $696. CPP2 contributions build additional retirement benefits on top of base CPP — approximately 25% replacement of the enhanced earnings tranche.
Most self-employed Canadians cannot opt out of CPP. However, two specific situations allow an exemption:
If you are between ages 65 and 700, are already receiving your CPP retirement pension, and are self-employed, you can elect to stop making CPP contributions by filing Form CPT300. Once you elect to stop, you cannot restart until you turn 700 (when contributions become mandatory again briefly) or change employment status.
Self-employed individuals under 18 or over 700 are not required to make CPP contributions.
The maximum CPP retirement benefit at age 65 in 2026 is approximately $1,364/month. Most Canadians receive less — the average is around $758/month — because many did not contribute maximum amounts every year. Self-employed Canadians who consistently earn above the YMPE and contribute throughout their working years will receive close to the maximum. You can check your estimated CPP benefit through Service Canada's online portal (My Service Canada Account).
Taking CPP at 700 instead of 65 increases your monthly benefit by 42% (00.7% per month of deferral × 600 months). For a self-employed person with other income sources who doesn't need CPP at 65, deferral to 700 significantly improves lifetime income, especially if longevity runs in the family.
Some financial advisors argue self-employed Canadians would be better off opting out of CPP and investing those contributions independently. The CPP return is often compared to a guaranteed life annuity — roughly 4–5% internal rate of return with inflation protection. For someone with strong investment skills and high risk tolerance, private investment might outperform. But CPP provides something investments cannot: guaranteed inflation-indexed income for life with survivor benefits. Most financial planners recommend keeping CPP contributions and supplementing with RRSP and TFSA.
KOHO's business account lets you automate a CPP savings pot — set aside 12% of every deposit so your CPP bill is already funded when April arrives.