How the 2025 Federal Budget will impact your finances

With files from Alyssa Prizzon, Kyla Friel, and Penelope Graham

They’re calling it a “generational investment” budget – a $581-billion plan that looks to pare down federal public ranks and funnel new support to “Canada Strong” initiatives, designed to help the economy weather the ongoing fallout from Trump’s trade war.

The plan– which still needs to be voted through by the opposition – will cause the total 2025-fiscal year deficit to balloon to $78.3 billion, and includes a total of $20.1 billion in net new spending. That spend is earmarked for a wide variety of initiatives including beefed-up defence funding, AI, diversifying trade, natural disaster response, and community building projects, including a new cash infusion for the recently-launched Build Canada Homes agency.

There were also many pledges made to advance Canada’s banking sector, including new regulations for crypto and open banking. Here, we break down the budget line items most likely to impact your wallet.

Coming changes for open banking and oversight

In a long-awaited development, Ottawa announced a major shift in Canada’s long-awaited open banking rollout: oversight of the framework will move from the Financial Consumer Agency of Canada (FCAC) to the Bank of Canada. 

By consolidating open banking, payment modernization, and the forthcoming Real-Time Rail system under one regulator, the government says it will increase competition in the financial sector and make it easier for fintechs and smaller institutions to participate.

Open banking—also called consumer-driven banking—will allow Canadians to securely share their financial data with third parties through regulated digital connections, rather than risky “screen-scraping” where users hand over login credentials. In practice, it means consumers will be able to connect accounts to budgeting apps, comparison tools, or new financial providers without giving up control of their data.

While the move to the central bank could cause short-term delays, experts say it may create a more cohesive system in the long run. The government still plans to launch the first phase by 2026, followed by new features, like the ability to authorize third parties to pay bills or switch accounts on your behalf, by mid-2027.

The budget also includes plans to introduce data mobility rights, giving Canadians the legal ability to access and transfer their financial data between institutions. For consumers, open banking could ultimately mean more product choice, easier account switching, and pressure on banks to offer better rates and services.

Also read: How to avoid excess bank fees

New regulation plans for stablecoins

The federal budget also confirmed that Ottawa will move ahead with new regulations for stablecoins, a type of cryptocurrency whose value is tied to a real-world currency, such as the Canadian or U.S. dollar. The goal is to make digital payments safer and more reliable while encouraging innovation in Canada’s growing fintech sector.

The upcoming legislation will set rules for how stablecoins are issued and backed, requiring companies to hold reserves to match their digital assets and to meet new standards for risk management, privacy, and national security. It will also amend the Retail Payment Activities Act so approved payment providers can use certain stablecoins for everyday transactions.

Stablecoins have become popular in the U.S. as a faster and cheaper way to move money, prompting Canadian regulators to act before the market is dominated by U.S. dollar–backed versions. Industry leaders say clear rules could pave the way for Canadian dollar–linked stablecoins and help keep digital finance innovation and capital at home.

For consumers, the change could eventually mean new, low-cost payment options that combine the stability of traditional currency with the speed of cryptocurrency, though it will take time for these systems to be built and adopted.

Updates to Canada’s tax system

The 2025 federal budget introduces several updates to Canada’s tax system aimed at simplifying filing, closing loopholes, and easing the burden on low- and middle-income Canadians.

One of the most notable changes is automatic tax filing for low-income earners whose income falls below the federal basic personal amount. The Canada Revenue Agency will send these individuals pre-filled tax information and, if they don’t file within 90 days, will submit returns on their behalf. The goal is to ensure more Canadians receive the benefits and rebates they qualify for without missing filing deadlines.

The budget also proposes a Top-Up Tax Credit to correct a quirk caused by last spring’s middle-class tax cut. When the lowest income tax rate dropped from 15 to 14 per cent, the value of non-refundable credits like tuition or medical expenses decreased. The new top-up credit will ensure no taxpayer ends up paying more because of that change.

Meanwhile, the government plans to eliminate so-called “double dipping” for certain renovation-related tax claims. Starting in 2026, Canadians will no longer be able to claim the same expense under both the Medical Expense Tax Credit and the Home Accessibility Tax Credit, a rule intended to streamline the system and prevent overlapping deductions.

For businesses, the budget introduces a corporate tax reduction to spur investment and boost competitiveness with the U.S., lowering the marginal effective tax rate to 13.2 per cent for eligible corporations.

Together, these updates reflect a shift toward making Canada’s tax system more efficient, accessible, and fair, particularly for lower-income households and small businesses still feeling the squeeze of rising costs.

Combatting financial fraud

Canadians are losing more money to scams than ever before. In 2024, the Canadian Anti-Fraud Centre reported $643 million in losses—a nearly 300% increase since 2020—with only a fraction of cases ever reported. From text message scams and fake bank emails to phone impersonation schemes, fraud has become more sophisticated and harder to detect, especially for seniors, newcomers, and other vulnerable groups.

To respond, the federal government is developing a National Anti-Fraud Strategy that will bring together banks, telecom providers, and tech companies to coordinate efforts and share information. The plan also includes new rules requiring banks to strengthen their anti-fraud policies, get explicit customer consent for certain account features, and allow Canadians to set their own transaction limits. Financial institutions will also need to report anonymized data on fraud cases to regulators to better inform future policy.

Beyond consumer protection, Ottawa plans to tighten anti-money laundering laws by restricting large cash transactions of $10,000 or more and prohibiting third-party cash deposits. It’s also supporting the new Integrated Money Laundering Intelligence Partnership, which links law enforcement with major banks to track and disrupt organized financial crime.

Also read: Financial fraud: are you covered?

What’s the impact on insurance?

The budget outlined a few plans related to severe weather that could affect insurance premiums for Canadians. As part of the government’s initiative to strengthen Canada’s emergency management, the budget proposes action to protect against wildfires. This includes funding $257.6 million over four years (starting in 2026-2027) to Natural Resources Canada to boost wildfire-fighting capacity. Wildfire seasons have become increasingly severe across the country, leading to a high volume of home insurance claims and driving up premiums. Investing resources to fight fires more effectively could reduce damage caused by future fires, resulting in fewer claims and preventing further premium increases.

In addition, the new Build Communities Strong Fund addresses further climate-related risks, including flooding. The Fund will invest $51 billion over 10 years to build infrastructure across Canada. A portion of the funding ($6 million) will support projects such as climate adaptation and large building retrofit, which could include flood protection. It’s worth noting that there was no mention of the National Flood Insurance Program, which was expected to launch this year. 

Lastly, the budget lists the government’s plan to consult with P&C insurers to strengthen Canada’s insurance industry and economy against earthquakes, as coverage is currently limited. The risk of earthquakes is highest in British Columbia and the Ottawa-Montreal-Quebec City areas. However, in these regions, earthquake insurance is becoming increasingly difficult and expensive to secure. According to the Insurance Bureau of Canada (IBC), a major earthquake in B.C. could cause nearly $100 billion in economic losses. In contrast, a smaller earthquake in Quebec could cause tens of billions of dollars in losses. The budget plans are the first steps to protect Canadians from the financial aftermath of a potential extreme earthquake. 

Also read: Climate change and its impact on your insurance 

Non-climate-related plans include changes to the Pensioners’ Dental Plan. The budget proposes increasing the required years of public service to be eligible from two to six. This change is expected to save $101.8 million over five years (starting in 2025-2026) and $13.1 million each year after. Retirees who are no longer eligible can still get similar coverage under the Canadian Dental Care Plan. Or they can purchase private dental insurance coverage for regular dental care or age-related needs, such as dentures. 

New funding for housing supply, and the removal of unpopular real estate taxes

A key issue facing Canadians continues to be home affordability and the chronic shortage of housing stock, both at the rental and ownership levels. According to the federal Canada Mortgage and Housing Corporation (CMHC), current home building output must double to between 430,000 to 480,000 units annually over the next decade, just to restore affordability conditions to 2019 levels.

Like budgets before it, Carney’s tome points to the challenges of building necessary supply; rising interest rates, red tape, construction costs and taxes have made it challenging to greenlight new developments and see them through to completion. To address these pain points, this budget will set forth an investment of $13 billion over five years via Build Canada Homes, the new agency that was rolled out this September.

This will include:

• Using factory-built housing to quickly create an initial 4,000 units on six public land sites, with additional capacity of up to 45,000 homes across Canada Lands Company’s properties.
• Launching a $1.5-billion fund to protect existing rental properties
• Providing $1 billion to build transitional and supportive housing for people who are homeless or at risk of homelessness.
• Provide mortgage funding for new multi-unit rental housing via an increased issuance of Canada Mortgage Bonds

The budget also takes aim at a few housing taxes, including eliminating the GST for first-time home buyers who are purchasing newly-built properties valued up to $1 million. While the initiative was first announced in March, it still needs to be officially passed as a part of Bill C-4. Once in place, it will apply to any applicable home purchase that took place after May 26, 2025.

The government also intends to nip a previously-proposed tax on luxury boats and planes, as well as doing away with the Underused Housing Tax, which applies a 1% tax on residential property owned by foreign entities that is considered vacant or underused. While put in place to address speculative foreign investment concerns, the tax has provided little return, while complicating tax time for many Canadian homeowners, who need to provide a special tax return to prove their homes occupied status. The tax would end in the 2025 calendar year, meaning homeowners must still file the return for the years 2022 through 2024 to avoid paying 1% of their home’s value.

Also read:

• Government vows to remove GST on new home purchases
• What is open banking and why does it matter?
• Canada’s housing boom: The affordability domino effect of building in high-risk areas

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