Employer Health Tax (EHT) in Ontario: 2026 Rates, the C$1 Million Exemption and How to File

Ontario's Employer Health Tax (EHT) is a provincial payroll tax that helps fund health care. Most small businesses never pay it, because eligible employers are exempt on the first C$1 million of payroll each year. But once you cross that line — or once you own two companies whose payrolls add up — it becomes a real cost with its own registration, instalments and annual return. This guide explains who pays, the exemption and how associated businesses share it, the rate scale, instalments, the March deadline, penalties and the common traps, with worked examples in Canadian dollars.

Quick answer

Ontario employers pay EHT on payroll for staff who work at, or are paid through, an Ontario permanent establishment. Eligible private employers are exempt on the first C$1 million a year; above that, the rate is 0.98% to 1.95% depending on total payroll.

• No exemption if your (or your associated group's) Ontario payroll is over C$5 million

• Associated employers share one exemption via an allocation form

• Monthly instalments once payroll passes C$1.2 million, due on the 15th of the following month

• Annual return and balance due by 15 March of the following year

• Paid entirely by the employer — never deducted from staff pay

What EHT is and who pays it

EHT is charged under Ontario's Employer Health Tax Act and administered by the Ministry of Finance. It's a tax on remuneration you pay to current and former employees — not on profits, and not on payments to genuine independent contractors. Unlike CPP and EI, which we cover in our payroll deductions guide, there's no employee share. The employer pays all of it.

You owe EHT on remuneration paid to employees who:

• physically report for work at your permanent establishment in Ontario;
• are attached to your Ontario permanent establishment; or
• don't report to any of your permanent establishments but are paid from or through your Ontario permanent establishment.

That means a remote employee working from home in Ottawa is generally caught if they're paid through your Toronto office, and an Alberta company's staff who report to an Ontario branch are caught too. Out-of-province employers setting up an Ontario establishment for less than 24 months are asked to call the ministry to discuss registration.

What counts as remuneration

Remuneration follows the federal Income Tax Act sections 5, 6 and 7 — broadly, employment income in box 14 of the T4 slip plus other employment amounts on T4 and T4A slips. As well as salaries and wages, it includes bonuses (in the year paid), vacation pay, commissions to employees, signing bonuses, taxable allowances and benefits, stock option benefits, directors' fees, controlled gratuities paid through the employer, employer contributions to group RRSPs, and taxable benefits given to retirees. It excludes commissions paid to independent agents under a contract for service, tips customers give staff directly, and non-cash gifts and awards within the CRA's C$500 tax-free limits.

The C$1 million exemption

The exemption is what keeps most small businesses out of EHT entirely. If you're an eligible employer, you pay no EHT on the first C$1 million of total Ontario remuneration each year. A stand-alone eligible employer with C$900,000 of payroll pays nothing and doesn't need to register.

The amount has moved over the years. It was C$450,000 from 2014 to 2018 and C$490,000 in 2019. For 2020 the province doubled it to C$1 million as a pandemic measure, then made that permanent in 2021. The exemption is meant to be indexed to Ontario inflation every five years; because of the doubling, the next adjustment was pushed from 2024 to 1 January 2029. Ignore claims online of a higher 2026 exemption — the Ministry of Finance's own guide still shows C$1 million.

Who is an eligible employer

Generally, eligible employers are those subject to income tax and not controlled by any level of government — corporations, sole proprietors, partnerships and trusts in the private sector, plus organisations that receive government money but aren't government-controlled. Non-eligible employers include federal, provincial and municipal governments, universities, colleges, school boards and hospitals, many Crown agencies, and bodies where a government appoints the majority of directors (or a municipality can appoint any director). Non-eligible employers pay EHT on every dollar of payroll from the first.

The C$5 million cut-off

There is no exemption at all if your Ontario payroll — including all associated employers — is more than C$5 million for the year. At that point you pay 1.95% on the whole payroll. Registered charities are the exception: they keep the exemption above C$5 million, and an associated group doesn't need to count a related charity's payroll when testing the threshold.

EHT rates for 2026

The rate depends on your total Ontario remuneration before the exemption is taken off. It isn't a marginal scale: the single rate for your payroll level applies to all your taxable payroll.

The lower brackets matter mainly for non-eligible employers and for employers who've lost the exemption through association. An eligible stand-alone employer only starts paying above C$1 million, which is already far into the top bracket — so in practice its rate is always 1.95%.

How to calculate EHT — worked examples

The ministry's method has three steps: total your Ontario remuneration and use that figure to find your rate; deduct your exemption; multiply what's left by the rate.

Example 1 — under the exemption. A Kitchener software company with 9 staff and C$860,000 of Ontario payroll, not associated with any other business. Payroll is below C$1 million, so EHT is nil. It doesn't register, file a return or pay instalments.

Example 2 — a growing manufacturer. A Mississauga manufacturer has C$1,800,000 of Ontario payroll, paid evenly at C$150,000 a month. Its rate is 1.95% because payroll before the exemption is over C$400,000. Taxable payroll is C$1,800,000 − C$1,000,000 = C$800,000, so annual EHT is C$800,000 × 1.95% = C$15,600.

Example 3 — a non-eligible employer. The ministry's own example: an employer with C$175,000 of payroll that can't claim any exemption pays at 0.98%: C$175,000 × 0.98% = C$1,715.

Example 4 — starting part-way through the year. A new eligible employer that opens its Ontario establishment on 1 July 2026 is an eligible employer for 184 days of the 365-day year. Both the exemption and the C$5 million cut-off are prorated: its exemption is C$1,000,000 × 184 ÷ 365 = C$504,109.59. If its July–December payroll is C$620,000, it pays 1.95% on C$115,890.41 = C$2,259.86.

Working out your EHT

1. 1

   Total your Ontario remuneration

   Add up all employment income for staff who report to, or are paid through, your Ontario permanent establishment — salaries, bonuses, vacation pay, taxable benefits and stock option benefits.

2. 2

   Pick your rate from the table

   Use total payroll before the exemption. Over C$400,000 means 1.95%.

3. 3

   Check your exemption

   C$1 million if you're a stand-alone eligible employer; your allocated share if associated; prorated for a part year; nil above C$5 million.

4. 4

   Multiply taxable payroll by the rate

   Taxable payroll = total remuneration − exemption. Multiply by your rate for the annual tax.

5. 5

   Register, then file and pay on time

   Register if you owe tax or belong to an associated group over the exemption; pay instalments if required and file by 15 March.

   Ontario — Employer Health Tax guide

Associated employers: one exemption for the group

This is where EHT catches small business owners. If you control two or more businesses — or you and close family members do — they are probably associated, and the whole group gets one C$1 million exemption, not one each. They must share it even if they run completely separately.

Ontario uses the federal associated-corporations rules in section 256 of the Income Tax Act, and extends them to individuals, partnerships and trusts: an individual is treated as owning all the shares of their unincorporated business, partners own shares in proportion to their share of partnership income, and trust beneficiaries likewise. Employers are associated if they're associated at any time in the year. Common examples from the ministry's guide:

• one company controls another (a parent owning 97% of a subsidiary);
• one person controls both (a dentist owning 83% of one company and 75% of another);
• one group of people controls both;
• each company is controlled by a different person, the two are related — spouses, parents and children, siblings, in-laws — and one of them owns at least 25% of any class of shares in the other company.

Two traps catch people. First, a corporation that elected federally not to be associated for the small business deduction can't use that election for EHT — there's no opt-out. Second, control can exist without majority share ownership, through influence such as the power to replace the board. A franchisor's influence under a franchise agreement, though, isn't control.

Sharing the exemption

One member of the group completes the Associated Employers Exemption Allocation Form for the whole group and submits it with its annual return; it can also be done online. If any associated employer is missing from the form, or no form is submitted, every member loses the exemption. Since 2025, after Bill 216 received Royal Assent in November 2024, each member's exemption is the lesser of what the group allocates to it and what it would have had on its own — so you can't allocate more to a part-year member than its prorated stand-alone exemption. The province also removed the old special-filer provisions from 1 January 2025.

Example 5 — two related companies. Priya owns 100% of a Brampton bakery (payroll C$700,000) and 60% of a catering company (payroll C$600,000). The two are associated because Priya controls both. Combined payroll is C$1,300,000 — under C$5 million, so the group has one C$1,000,000 exemption to share. They allocate C$700,000 to the bakery and C$300,000 to the caterer. The bakery owes nothing. The caterer's rate is 1.95% (its own payroll is over C$400,000), and it pays (C$600,000 − C$300,000) × 1.95% = C$5,850. Had Priya assumed each company got its own C$1 million, she'd have under-paid by exactly that amount — plus penalties and interest.

Registering for EHT

You must register with the Ontario Ministry of Finance if you're not eligible for the exemption, or if you are eligible but your payroll exceeds your allowable exemption. You also have to register and file as an associated employer if you control or are controlled by another employer, hold significant influence over one, reported an association on your T2 return, opted out of association for the federal small business deduction, bought or sold another employer during the year, or your associated group's total payroll exceeds the exemption.

Before registering, have your legal and trade names, business and mailing addresses, contact person, payroll start date and frequency, CRA Business Number and employer type ready. You can register online, by calling 1-866-ONT-TAXS (1-866-668-8297), or at a ServiceOntario self-help workstation. Then sign up for ONT-TAXS online, Ontario's business tax portal, where you file returns, make payments, see your account and authorise your bookkeeper or accountant.

A business that runs separate payrolls — for example, one per location — can hold multiple EHT accounts under one Business Number, each with its own extension number. Each account files its own instalments and return, the exemption is allocated between them, and the rate is based on combined payroll across all accounts.

Monthly instalments

Since the 2021 tax year, only employers with annual Ontario payroll over C$1.2 million pay monthly instalments; before 2021 the threshold was C$600,000, which many older guides still quote. If your payroll is C$1.2 million or less, you pay the whole year's EHT with your annual return.

If you're over the threshold, track cumulative payroll month by month. Once it passes C$1.2 million, your first instalment is the tax on everything above your exemption, due on the 15th of the following month; after that, each month's instalment is that month's payroll × your rate. New employers in their first or second year estimate the year's payroll to decide whether instalments apply.

Example 2's instalment schedule (C$150,000 payroll a month)

Jan–Jul

Cumulative payroll reaches C$1,050,000 — exemption used up in July, but under the C$1.2m instalment threshold

August

Cumulative C$1,200,000 — at, but not over, the threshold

15 October

First instalment for September: (C$1,350,000 − C$1,000,000) × 1.95% = C$6,825

15 Nov, 15 Dec, 15 Jan

October, November and December: C$150,000 × 1.95% = C$2,925 each

15 March (next year)

Annual return; instalments total C$15,600, so nothing further owing

The annual return: 15 March

You must file an EHT annual return if your Ontario payroll is greater than your exemption (or prorated exemption), if you're not eligible for the exemption and have any Ontario payroll, if you paid instalments during the year, if you received a personalised return, or if you're in an associated group whose combined payroll exceeds the exemption. The return and any balance are due on or before 15 March of the following year — so returns for 2026 are due by 15 March 2027.

File and pay through ONT-TAXS online, or use the ministry's EHT Annual Return Portal to file without paying (no login needed). Select ServiceOntario locations and mail to the Ministry of Finance in Oshawa are still options. Note a payment change: from 1 December 2026, financial institutions will no longer accept paper remittance vouchers for in-person bill payments, so if you pay at a bank counter today you need to move to online banking, ONT-TAXS or another electronic method before then. Annual returns have never been accepted at banks.

The return is also where the year is trued up. Exemption amounts taken during the year through reduced instalments are finalised, associated-group allocations are attached, and any instalment shortfall or overpayment is settled. Keep payroll records and books that show how you calculated remuneration; ministry auditors can visit your place of business to check.

Penalties, interest and objections

EHT penalties are percentage-based and can add up quickly:

Interest also runs on unpaid balances at a rate the ministry sets, which can change every three months. On top of administrative penalties, the Act creates offences — for example, evasion carries a fine of at least C$500 or 25% of the tax, up to double the tax, and up to two years' imprisonment — and directors who authorise an offence can be prosecuted personally. A corporation in default can even be threatened with dissolution if it doesn't fix the default within 90 days of notice.

Worked penalty example. If the manufacturer in Example 2 had paid no instalments and filed its return three complete months late with C$15,600 owing, the late-filing penalty would be 5% × C$15,600 = C$780 plus 3% × C$15,600 = C$468, for C$1,248 — before interest and any instalment penalties.

If you disagree with an assessment, call the ministry first. If that doesn't resolve it, file a notice of objection online or by mail within 180 days of the date of the notice of assessment or reassessment.

Common mistakes and how to fix them

Assuming each company gets C$1 million. Associated companies share one exemption. Fix: map ownership (Schedules 9 and 23 of your T2 return are a good start), file the allocation form, and pay any shortfall with a voluntary correction before an audit.

Forgetting the allocation form. Leaving out one associated employer, or not filing the form, costs the whole group its exemption. Fix: one person in the group owns the form every year.

Counting only base salary. Bonuses, taxable benefits, vacation pay and group RRSP matches are all remuneration. Fix: start from T4 box 14 totals, plus T4A employment amounts for former employees.

Using the old C$600,000 instalment threshold. It's C$1.2 million now. Fix: track cumulative payroll and start instalments only once you pass it — but don't miss the month you do.

Claiming the exemption up front when you'll exceed C$5 million. If you expect to pass the cut-off, or no group member operated the full year, the ministry says not to reduce instalments by the exemption. Fix: increase instalments the month after you exceed it, until the exemption already claimed is repaid.

EHT year-end checklist

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• Total Ontario remuneration calculated from T4 and T4A employment amounts
• Associated employers identified using section 256 rules
• Allocation form completed for the whole group
• Exemption prorated if any member operated part of the year
• Instalments reconciled to the annual tax
• Annual return filed and balance paid by 15 March
• Paper remittance vouchers replaced before 1 December 2026

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Official links

• Ontario — Employer Health Tax (EHT)Rates, exemption, registration, instalments, returns, penalties
• Ontario — EHT tax exemptionEligible employers, proration, C$5 million cut-off
• Ontario — EHT associated employersAssociation rules and examples
• Ontario — EHT remunerationWhat counts as payroll
• ONT-TAXS onlineFile, pay and manage your EHT account

What to do next

Add up this year's Ontario payroll across every business you or your family control. If the total is heading past C$1 million, register for EHT, set a monthly check for the C$1.2 million instalment trigger, and diarise 15 March. While you're working through payroll costs, make sure your WSIB coverage and federal payroll deductions are in order too — and our salary slip generator keeps remuneration records consistent from the start.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

What is the Employer Health Tax exemption in Ontario?

Eligible private-sector employers don't pay EHT on the first C$1 million of annual Ontario payroll. The exemption is shared across associated employers and isn't available at all if your — or your group's — Ontario payroll is over C$5 million, unless you're a registered charity. It's next due to be adjusted for inflation on 1 January 2029.

What are the EHT rates in Ontario?

Rates rise with total Ontario payroll before the exemption: 0.98% on payroll up to C$200,000, stepping through seven middle brackets, to 1.95% once payroll is over C$400,000. Because an eligible employer only pays once payroll passes C$1 million, almost every employer that actually owes EHT pays at 1.95%.

When is the EHT annual return due?

The annual return and any balance owing are due on or before 15 March of the following year — so the 2026 return is due by 15 March 2027. Employers with Ontario payroll over C$1.2 million must also pay monthly instalments, due on the 15th of the following month, once cumulative payroll passes that threshold.

Do I need to register for EHT if my payroll is under C$1 million?

Usually not. You only need to register if you're not eligible for the exemption, if your payroll exceeds your allowable exemption, or if you're part of an associated group whose combined Ontario payroll exceeds the exemption. A stand-alone eligible employer with C$800,000 of payroll doesn't register, file or pay.

How do associated employers share the EHT exemption?

Associated employers — generally businesses connected by common control under the federal Income Tax Act rules — get one C$1 million exemption between them. One member files an Associated Employers Exemption Allocation Form for the whole group with its annual return. If any member is left off, or the form isn't filed, the whole group loses the exemption.

How do I calculate Ontario EHT?

Find your total Ontario remuneration for the year, use it to pick your rate, subtract your exemption, and multiply the rest by the rate. For example, payroll of C$1,300,000 uses 1.95%; after the C$1,000,000 exemption, C$300,000 × 1.95% = C$5,850. An employer with no exemption and C$175,000 of payroll pays C$175,000 × 0.98% = C$1,715.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 9 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Employer Health Tax (EHT) — Ontario Ministry of Finance · accessed 9 October 2026
2. 2.Tax exemption — Employer Health Tax — Ontario Ministry of Finance · accessed 9 October 2026
3. 3.Associated employers — Employer Health Tax — Ontario Ministry of Finance · accessed 9 October 2026
4. 4.Remuneration — Employer Health Tax — Ontario Ministry of Finance · accessed 9 October 2026
5. 5.Ontario passes legislation amending the Employer Health Tax Act — DLA Piper · accessed 9 October 2026
6. 6.Employer Health Tax changes — Mainstay Insurance · accessed 9 October 2026