The 2026 Mid-Year Rate Changes
If you work in BC, Newfoundland and Labrador or PEI, your tax deduction changed with your first July pay — without any change to your salary. Here is exactly why, and why the rate your employer is now using is not your actual tax rate.
What happened
Three provinces announced tax changes after the 2026 payroll tables had already been published, and backdated them to 1 January. Employers had spent six months withholding at the old rates. To make the year come out right, the CRA republished its payroll formulas on 1 July with prorated values for the second half of the year — deliberately overshooting or undershooting so that the full-year total lands on the correct annual figure.
The three changes
| Province | What changed | Real annual value | July–December payroll value |
|---|---|---|---|
| British Columbia | lowest rate | 5.6% | 6.14% |
| British Columbia | tax reduction basic amount | $690 | $805 |
| Newfoundland and Labrador | basic personal amount | $13,094 | $15,000 |
| Prince Edward Island | top bracket rate over 200,000 | 20% | 21% |
Which number is right?
The annual value. The prorated figure is a payroll correction mechanism, not a tax rate — it exists only to square up six months of withholding at the wrong rate. When you file your return, the annual rate is what applies.
This matters for calculators. A site that ingested the CRA’s July payroll tables without understanding proration will show a British Columbia rate of 6.14% instead of the real 5.6% — and be wrong for the rest of the year. Every figure on this site uses annual values.
What you will actually notice
In BC and PEI, slightly more tax came off from July. In Newfoundland and Labrador, slightly less — the basic personal amount rose, so the prorated second-half amount is higher than the annual one. In all three cases the year totals to the correct amount, and any residual difference is settled when you file.
Common questions
Why did my tax deduction change in July without a raise?
Your province changed its tax rules retroactively to 1 January, and the CRA prorated the second half of the year to correct six months of withholding at the old rate.
Is the prorated rate my real tax rate?
No. It applies only to payroll withholding for the second half of the year. The annual rate is what applies on your tax return.
Will I be over- or under-taxed for the year?
Proration is designed so the full year comes out correct. Any small residual difference is settled when you file your return.
Sources: Canada Revenue Agency — T4127 Payroll Deductions Formulas (122nd and 123rd editions, 2026) and the published 2026 federal, provincial and territorial rate tables; Revenu Québec — 2026 income tax rates and the 2026 source-deduction parameters. Rates verified 9 August 2026.
Figures are computed from those published rates by our own engine, which is validated against the CRA’s Payroll Deductions Online Calculator. See how we calculate.