How Much Should a BC Contractor Set Aside for Taxes?
Self-employed in BC? See how much to hold back from every invoice for income tax, CPP and GST, with real examples and a free paycheque calculator.
Nobody Is Holding It Back for You
When you worked for someone else, tax came off every paycheque before you saw it. Once you go out on your own, that stops. The full invoice lands in your account, it feels like yours, and the bill shows up all at once in the spring. For a lot of sole proprietor contractors in the Okanagan, that April bill is the first time they find out how much of last year was never really theirs to spend.
What the Money Is Actually For
There are three separate pots to think about. The first is income tax, federal and BC, on your profit after business expenses. The second is the Canada Pension Plan. As an employee you paid half and your employer paid the other half. Self-employed, you pay both halves yourself: 11.9% of your net self-employment earnings between $3,500 and $74,600 for 2026, up to $8,460.90, plus a second, smaller CPP contribution (CPP2) on earnings above that. The third pot is GST, if you are registered. Registration is required once your taxable sales pass $30,000 over four consecutive calendar quarters, and many contractors register earlier. The GST you charge on an invoice was never your money. It belongs to CRA, less the GST you paid on business purchases, and it should never be mixed in with your income tax savings.
What It Looks Like in Real Numbers
We ran five example trades through our free Contractor Paycheque Calculator using 2026 BC rates. These are examples, not advice for your situation, but they show the range. A solo framer charging $85 an hour, billing 32 hours a week plus 10 unpaid hours for quoting, driving and admin, over 46 weeks with $24,000 in costs: about 25% of every invoice set aside, roughly $2,740 a month. A busy electrician at $110 an hour: about 30%. A part-time handyman at $60 an hour: about 21%. The pattern is simple. The more you earn, the higher the share you need to hold back, because each extra dollar of profit is taxed at a higher rate and adds to your CPP until you hit the maximum.
Why a Flat Percentage Is Only a Starting Point
You will hear "just put away 25%" a lot. It is a fair place to start, but it can be off in either direction. Your actual number depends on your profit, not your sales, so a contractor with heavy truck and tool costs owes less on the same billings than one with low costs. Other income in your household, RRSP contributions and the credits you claim all move it too. In most cases the right percentage is worth working out once, properly, and then checking each year.
The April 30 Surprise, Then Instalments
Self-employed people have until June 15 to file, but any balance owing is still due April 30. Interest starts after that date even if you file on time. And if your net tax owing is more than $3,000 this year and in either of the two years before, CRA will ask you to pay by instalments on March 15, June 15, September 15 and December 15. That means paying this year's tax while you may still be catching up on last year's. Contractors who set money aside from every invoice handle that switch easily. Contractors who don't often end up borrowing to cover it.
A Simple System That Works
Open a separate savings account just for tax. Every time a client pays you, move your percentage into it the same day, before you spend anything. If you are GST registered, move the GST portion as well, either into the same account or a second one. Leave it alone until CRA is due. It is not complicated, but it only works if it happens every single time, not when there is money left over at the end of the month.
Run Your Own Numbers
Our free Contractor Paycheque Calculator takes about 60 seconds. Enter your rate, your billed and unpaid hours, and your main costs, and it shows what you really keep per hour, how much to set aside from every invoice, the rate you need to charge to hit your take-home goal, and whether incorporating is worth a conversation. No sign-up, and the results are yours. It gives estimates based on 2026 BC rates, so treat them as a starting point, not a filed return.
How Murtagh & Co. Can Help.
We help Okanagan trades and construction owners work out the right set-aside for their actual numbers, keep the books current so that number stays accurate, file T1 and GST/HST returns on time, and plan for instalments before CRA asks. If you are earning enough that incorporating might make sense, we will walk you through what it could defer, what it costs to run, and the limited-liability side, so you can decide with the full picture. Results depend on your situation, and we will be straight with you about what to expect.
As a former trades business owner, I have been on the other side of this: profitable on paper, then caught short when the tax bill came due. That is why we build the set-aside into the system from the start instead of fixing it in April.
Prefer to talk it through? Book a free 30-minute call at a time that works for you, or reach out at info@murtaghco.ca.