How employment changes affect your taxes in Canada is one of the most overlooked parts of filing season, even though a new job, a layoff, or a raise can quietly change how much tax you owe. In 2026, the federal basic personal amount rises to $16,452, the CPP contribution rate stays at 5.95% with maximum pensionable earnings rising to $74,600, and EI maximum insurable earnings increase to $68,900. If you changed jobs during 2025 or 2026, each employer only withholds tax, CPP, and EI based on what they alone paid you, which means switching jobs mid-year can quietly cause under-withholding, over-withholding, or a CPP/EI overcontribution refund at tax time.
This guide explains exactly how a job change affects your taxes in Canada, from multiple T4 slips and tax bracket shifts to severance pay, EI clawbacks, and CPP overcontributions. We’ll be updating this article monthly to reflect the latest CRA payroll figures, bracket indexing, and rule changes for 2026. Whether you got a raise, were laid off, started freelancing, or worked for two employers in the same year, the sections below walk through what actually happens to your tax bill and what you can do before filing to avoid an unexpected balance owing.
How Employment Changes Affect Your Taxes Key Highlights
| Key Data Point | 2026 Figure |
|---|---|
| Basic Personal Amount (BPA) | $16,452 (full amount up to $181,440 net income) |
| Lowest federal tax bracket rate | 14% (on income up to $58,523) |
| CPP contribution rate | 5.95% (unchanged) |
| CPP maximum pensionable earnings (YMPE) | $74,600 (up from $71,300) |
| CPP2 earnings ceiling (YAMPE) | $85,000 |
| Maximum employee CPP contribution | $4,230.45 |
| Maximum CPP2 contribution | $416.00 |
| EI premium rate (employee) | 1.63% (down slightly from 1.64%) |
| EI maximum insurable earnings | $68,900 (up from $65,700) |
| Maximum employee EI premium | $1,123.07 |
| Federal bracket indexing for 2026 | 2.0% |
| 2025 EI repayment (clawback) income threshold | $82,125 |
Why Changing Jobs Affects Your Taxes
Changing jobs during the year can affect your taxes even if your total annual income stays roughly the same. Each employer calculates income tax, CPP, and EI deductions only on what that employer paid you, with no visibility into income you earned elsewhere in the same year. A new employer typically assumes you are starting fresh for tax credit and deduction purposes, which means the combined withholding from two or more employers may not match what you actually owe once all your income is combined on your return. Differences in salary, bonuses, benefits, and how each payroll system calculates deductions can all result in too much or too little tax being withheld across the year.
Multiple Employers and T4 Slips
If you worked for more than one employer during the tax year, you should receive a separate T4 slip from each employer, and every T4 must be reported on your tax return, regardless of how briefly you worked there or how little you earned. Missing a T4 or T4A, even from a short-term or part-time role, can trigger a CRA reassessment, which may result in additional taxes owed, interest charges, or delayed refund processing. If you have a second job at the same time as your main job, checking the “more than one employer” box and entering $0 for personal tax credits on that second employer’s TD1 form can help prevent under-withholding, since claiming the basic personal amount twice, once at each job, is a common cause of an unexpected balance owing.
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How a Raise or Pay Cut Shifts Your Tax Bracket
Moving to a higher-paying job can push part of your income into a higher federal tax bracket, since Canada’s system taxes income progressively rather than applying one flat rate to your entire salary. In 2026, the federal brackets are 14% up to $58,523; 20.5% from $58,524 to $117,045; 26% from $117,046 to $181,440; 29% from $181,441 to $258,482; and 33% above $258,482. Conversely, if you experienced unemployment between jobs or moved to a lower-paying role, your total taxable income for the year may be lower than in prior years, potentially reducing your overall tax bill or increasing eligibility for income-tested benefits and credits.
CPP and EI Overcontributions When You Switch Jobs
Because a new employer has no visibility into how much CPP or EI you already contributed through a previous job, payroll deductions are calculated as though the new job were your only source of income for the year. If your combined CPP or EI contributions across two or more employers exceed the annual maximum, $4,230.45 for CPP and $1,123.07 for EI in 2026, the excess amount is refunded to you when you file your tax return. This is one of the more common reasons switching jobs mid-year can actually result in a larger refund than expected, particularly for people who changed jobs partway through the year after already reaching a meaningful portion of the annual contribution ceiling at their previous employer.
How Severance Pay Is Taxed in Canada
Severance pay, technically called a retiring allowance by the CRA, applies to termination pay, severance packages, or wrongful dismissal settlements, regardless of whether the recipient is actually retiring. Key tax facts for 2026:
- A retiring allowance is added to total income for the year and taxed at your combined federal and provincial marginal rate
- CPP contributions and EI premiums are not deducted from a retiring allowance, unlike regular salary
- Employers withhold tax at a flat lump-sum rate: 10% on amounts up to $5,000, 20% on $5,001 to $15,000, and 30% above $15,000
- This withholding is only an estimate; your actual tax owing is settled when you file your return, and may be higher or lower depending on your total annual income
- Eligible portions of a retiring allowance tied to pre-1996 years of service may qualify for a partial RRSP rollover, reducing the taxable amount
If severance is instead structured as salary continuance, it is treated as regular employment income and is subject to standard CPP and EI deductions, so how the settlement is worded can materially change the tax outcome.
EI Benefits Clawback (Repayment) Rules
Workers who received Employment Insurance benefits after a layoff, then returned to work or received severance in the same year, may be required to repay a portion of those EI benefits if their combined net income exceeds a set threshold, $82,125 for the 2025 tax year. This repayment provision, sometimes called the EI clawback, is intended to recover regular EI benefits from higher earners for whom the benefit was meant to serve only as short-term income replacement rather than supplemental income. Special benefits such as maternity, parental, and sickness benefits are generally not subject to this repayment rule, only regular EI benefits are affected.
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2026 Federal Tax Brackets and Payroll Numbers
Understanding the full 2026 payroll and tax picture helps explain why a job change can shift your bottom line:
- Basic Personal Amount: $16,452 for net income up to $181,440, phasing down to a minimum of $14,829 above $258,482
- CPP2 tier: An additional 4% CPP contribution applies to earnings between $74,600 and $85,000, adding up to $416 for higher earners
- Self-employed CPP: 11.9% combined rate (both employee and employer portions), with a maximum contribution of $8,460.90
- Federal bracket indexing: 2.0% for 2026, compared to 2.7% in 2025 and 4.7% in 2024
- Canada Employment Amount and other credits are also indexed annually and applied automatically, whether or not a TD1 form is filed
Steps to Avoid Tax Surprises After a Job Change
- Notify each employer if you hold more than one job at the same time, so tax credits aren’t claimed twice
- Keep every T4 and T4A slip you receive, even from short-term or seasonal work
- If you received severance, confirm whether it was structured as a retiring allowance or salary continuance, since the tax treatment differs significantly
- Track total EI benefits received if you were laid off, in case a portion becomes repayable due to the annual income threshold
- Consider RRSP contributions or charitable donations before year-end if a raise pushed you into a higher bracket, to help offset the additional tax
- Use the CRA’s payroll deductions online calculator to estimate whether your combined withholding across employers will be sufficient
Official Resources and Links
| Resource | Purpose | Official Link |
|---|---|---|
| Canada Revenue Agency (CRA) | File taxes, check T4/T4A slips, general account access | canada.ca/en/revenue-agency |
| My Account (CRA login) | View tax slips, notices of assessment, RRSP room | canada.ca/en/revenue-agency/services/e-services/individuals-login |
| CRA Payroll Deductions Calculator | Estimate tax, CPP, and EI withholding | canada.ca (Payroll Deductions Online Calculator) |
| Service Canada – EI Benefits | Check EI claim status and repayment rules | canada.ca/en/services/benefits/ei |
| TD1 Personal Tax Credits Return | Update tax credit claims with a new employer | canada.ca (Form TD1) |
FAQs
Do I need to report income from a job I only had for a short time?
Yes. All income must be reported regardless of how long you worked or how little you earned, even a T4 covering just a few weeks of employment.
What happens if I forget to include a T4 or T4A on my tax return?
The CRA may reassess your return, which can result in additional taxes owed, interest charges, or delays in receiving your refund. Returns can be corrected afterward through the CRA’s ReFILE process.
Why do I owe taxes even though deductions were taken from my pay?
Each employer withholds tax based only on what they paid you. If you had multiple employers or claimed personal tax credits at more than one job, total withholding across the year may fall short of what you actually owe.
Is severance pay taxed differently from regular salary?
Yes. Severance structured as a retiring allowance is not subject to CPP or EI deductions and is withheld at a flat lump-sum rate, while severance paid as salary continuance is taxed like regular employment income.
Will I get a refund if I overpaid CPP or EI after switching jobs?
Yes. If your combined CPP or EI contributions from multiple employers exceed the annual maximum, the excess is refunded when you file your tax return.
Do I have to repay EI benefits if I get a new job partway through the year?
Only if your total net income for the year, including EI benefits, exceeds the annual repayment threshold ($82,125 for 2025), and only regular EI benefits are subject to this repayment rule.
People Also Ask
Does changing jobs affect my tax refund in Canada? It can. Multiple employers, uneven withholding, and possible CPP/EI overcontributions can all increase or decrease your refund compared to staying with one employer all year.
Is severance pay taxed at a higher rate in Canada? Severance is withheld at a flat lump-sum rate (10%, 20%, or 30% depending on the amount), but the actual tax owed is based on your marginal rate once your full income is calculated at filing.
How much CPP and EI can I get back if I switch jobs mid-year? Any contributions beyond the 2026 annual maximums, $4,230.45 for CPP and $1,123.07 for EI, are refunded automatically when you file your return.
Do I pay more tax if I get a raise in Canada? Only the portion of income that falls into a higher tax bracket is taxed at the higher rate; your entire income is not retroactively taxed at the new, higher rate.
Conclusion
Employment changes affect your taxes in Canada in ways that are easy to miss until filing season, from multiple T4 slips and shifting tax brackets to CPP/EI overcontribution refunds and severance withholding rules. With the 2026 CPP and EI maximums rising and federal brackets indexed by 2.0%, understanding how a new job, a layoff, or a raise interacts with your total annual income can help you avoid an unexpected balance owing or ensure you claim every dollar you’re entitled to. Keeping track of every tax slip, confirming how severance was structured, and using the CRA’s official calculators before filing are the most effective ways to stay ahead of these changes. This guide will continue to be updated monthly as CRA figures and rules evolve through 2026.
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