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Canada | Nova Scotia Budget 2026
- On 23 February 2026, Nova Scotia's Minister of Finance announced the province's budget, which includes a proposed increase in the financial institutions capital tax from 4% to 6%, effective for tax years starting on or after 1 November 2026.
- The budget maintains current corporate and personal income tax rates, with no new taxes or increases, while extending the sunset date for the capital investment tax credit to 31 December 2035, providing continued support for businesses.
- As previously announced, a new provincial vaping product duty will be collected by the federal government through a Coordinated Vaping Product Taxation Agreement, effective 1 April 2026.
On 23 February 2026, Nova Scotia Minister of Finance and Treasury Board John Lohr (the Minister) tabled the province's fiscal 2026 budget. The budget contains no new taxes and no income tax increases; however, the budget includes a proposed increase to the financial institutions capital tax.
The Minister anticipates a deficit of CA$1.19b for 2026-27 and projects deficits for each of the next three years.
Following is a brief summary of the key tax measures.
Business tax measures
Corporate income tax rate
No changes are proposed to the corporate income tax rates or the CA$700k small-business limit.
Nova Scotia's 2026 corporate income tax rates are summarized in Table A.
Table A — 2026 Nova Scotia (NS) corporate income tax rates1
|
NS |
Federal and NS combined |
|
|---|---|---|
|
Small-business tax rate1 |
1.50% |
10.50% (up to CA$500k) 16.50% (CA$500k to CA$700k) |
|
General corporate tax rate2,3 |
14.00% |
10.50% (up to CA$500k) 16.50% (CA$500k to CA$700k) |
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 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).
Other business tax measures
The Minister also proposed the following business tax measures:
- Effective for tax years starting on or after 1 November 2026, the financial institutions capital tax rate will increase from 4% to 6%.
- The sunset date for the capital investment tax credit is extended by six years to 31 December 2035. In addition, the government will authorize the credit for qualified property acquired after 31 December 2035 if the preapproval application was received prior to the sunset date and approved based on prescribed criteria.
Personal tax
Personal income tax rates
The budget does not include any changes to personal income tax rates.
The 2026 Nova Scotia personal income tax rates are summarized in Table B.
Table B — 2026 Nova Scotia personal income tax rates
|
First-bracket rate1 |
Second-bracket rate |
Third-bracket rate |
Fourth-bracket rate |
Fifth-bracket rate |
|---|---|---|---|---|
|
CA$0 to CA$30,995 |
CA$30,996 to CA$61,991 |
CA$61,992 to CA$97,417 |
CA$97,418 to CA$157,124 |
Above CA$157,124 |
|
8.79% |
14.95% |
16.67% |
17.50% |
21.00% |
1 Individuals resident in Nova Scotia on 31 December 2026 with taxable income up to CA$15,220 pay no provincial income tax as a result of a low-income tax reduction. The low-income tax reduction is clawed back for income exceeding CA$15,220 until the reduction is eliminated, resulting in an additional 5% of provincial tax on income between CA$15,221 and CA$21,000.
For taxable income exceeding CA$157,124, the 2026 combined federal-Nova Scotia personal income tax rates are outlined in Table C.
Table C — Combined 2026 federal and Nova Scotia personal income tax rates
|
Bracket |
Ordinary income1 |
Eligible dividends |
Non-eligible dividends |
|---|---|---|---|
|
CA$154,125 to CA$181,440 |
47.00% |
31.92% |
41.94% |
|
CA$181,441 to CA$258,4822 |
50.29% |
36.46% |
45.72% |
|
Above CA$258,482 |
54.00% |
41.58% |
49.99% |
1 The rate on capital gains is one-half the ordinary income tax rate.
2 The federal basic personal amount comprises two elements: the base amount (CA$14,829 for 2026) and an additional amount (CA$1,623 for 2026). The additional amount is reduced for individuals with net income exceeding CA$181,440 and is fully eliminated for individuals with net income exceeding CA$258,482. Consequently, the additional amount is clawed back on net income exceeding CA$181,440 until the additional tax credit of CA$227 is eliminated; this results in additional federal income tax (e.g., 0.29% on ordinary income) on net income between CA$181,441 and CA$258,482.
Other measures
Vaping product tax harmonization
As previously announced, effective 1 April 2026, the federal government will collect a new provincial duty through a Coordinated Vaping Product Taxation Agreement equal to the federal duty of CA$1.12 per 2mL/g of vaping substance for the first 10mL/g of vaping substance in a device or container and CA$1.12 per 10mL/g for any additional amount. Nova Scotia's current vaping product tax will end on 31 March 2026.
Electric and hybrid vehicle levy
A new electric and hybrid vehicle levy will be implemented, effective 1 October 2026, when a prescribed vehicle is registered and every two years thereafter when the vehicle registration is renewed. Owners of fully electric vehicles will pay CA$500 every two years, and electric-hybrid vehicle owners will pay CA$250 every two years.
For up-to-date information on the federal, provincial and territorial budgets, visit ey.com/ca/Budget.
For additional information concerning this Alert, please contact:
Ernst & Young LLP (Canada), Halifax
- Dana Birch
- Jacqueline Purcell
- Kyle Schrader
For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor