2026 BC Budget: Key Tax Changes Business and Individuals Should Know

The 2026 provincial budget introduces several notable tax measures that will affect business, families, and individuals across British Columbia. While the government has paired some revenue measures with targeted supports, the overall direction signals tighter tax policy combined with focused incentives for innovation and manufacturing.

Below is a summary of the most important changes and what they may mean for you.

Business tax measures

SR&ED program aligned with federal changes

B.C.’s Scientific Research and Experimental Development (SR&ED) tax credit is being amended to align with recent federal updates. Key enhancements include:

• Restoration of eligibility for capital expenditures
• Increased expenditure limits
• Expanded access to refundable credits for eligible public corporations

These changes strengthen incentives for research and development and may improve cash flow for innovative businesses investing in growth. The change are effective for taxation years that begin on or after December 16, 2024.

New manufacturing and processing investment tax credit

A temporary refundable 15% tax credit will be introduced for investments made by Canadian-controlled private corporations (CCPCs) in:

• Buildings
• Machinery
• Equipment used in manufacturing and processing

The credit applies to qualifying investments made on or after April 1, 2026 until March 31, 2031, with a maximum refundable credit of $300,000 per corporation.

This measure is intended to encourage capital investment, productivity improvements, and expansion within BC’s manufacturing sector.

Personal tax changes

Increase to the lowest personal tax rate

Beginning with the 2026 taxation year, the lowest BC personal income tax rate will increase from 5.06% to 5.60%. This represents a meaningful adjustment for all taxpayers with taxable income in the first bracket.

To partially offset the impact, enhancements to the BC tax reduction credit are intended to protect lower-income earners, but middle-income taxpayers will still feel some effect from the rate increase.

Personal tax brackets frozen from 2027 to 2030

Indexation of personal tax brackets and non-refundable tax credits will be paused for the 2027 through 2030 taxation years. During this period, brackets and credit amounts will remain at 2026 levels instead of adjusting for inflation.

This freeze may gradually increase the effective tax burden over time, particularly for higher-income earners, as income growth pushes taxpayers into higher brackets without inflation relief.

Provincial Sales Tax expansion

Effective October 1, 2026, the 2026 BC Budget expands the application of PST to following services:

• accounting and bookkeeping,
• security and private investigation,
• rental property and strata management, and
• architectural, engineering and geoscience services.

The Budget also removes certain existing exemptions effective October 1, 2026, including exemptions for

• clothing patterns and materials, most clothing and footwear repair services (basic laundry services remain exempt), and
• basic cable television, toll-free telephone and residential landline services.

New support for families

Children and youth disability supplement

A new children and youth disability supplement will be added to the BC Family Benefit, with payments beginning July 1, 2027.

Eligible families may receive up to $6,000 annually per qualifying child, income-tested and tied to eligibility for the federal disability tax credit. This measure is designed to provide additional financial support to families caring for children with support needs.

Property Tax Deferment Program Changes

Amendment to interest rate terms

Effective for the 2026 and subsequent taxation years, the interest rate applied to newly deferred property taxes will be increased to prime plus two percent, compounded monthly. Property taxes deferred prior to the 2026 taxation year are grandfathered and will continue to accrue interest in accordance with the terms of the original deferment agreement, meaning the increased rate applies only to amounts deferred from 2026 onward.

This higher rate applies to both the regular property tax deferment program and the families with children deferment program.

Aside from the interest rate change, the budget materials do not identify any amendments to eligibility criteria, the types of taxes that may be deferred, or the mechanics of registration and security under the Land Tax Deferment Act.

Speculation and vacancy tax (SVT)

Effective January 1, 2027, the budget increases Speculation and Vacancy Tax rate to 4 percent (from 3 percent) for foreign owners, untaxed worldwide earners and certain other persons identified under the Speculation and Vacancy Tax Act. The increased rate will apply to residential property use for the 2027 calendar year and subsequent years. The 1 percent rate will continue to apply to Canadian citizens and permanent residents who are not untaxed worldwide earners.

In addition, amendments to the Act will introduce a $250 non-refundable late declaration penalty for property owners who fail to file the required declaration by the March 31 deadline, effective January 1, 2027.

Property Transfer Tax

Effective January 1, 2025, the Budget expands the purpose-built rental exemption from property transfer tax to include certain newly constructed purpose-built rental buildings. The exemption will apply where the building is leased for up to 24 months prior to registration of the first taxable transaction. The 24-month period will begin on the commencement date of the initial lease, and qualifying leases must have a minimum term of one month.

Our tax professionals are here to help you navigate through the changes of the BC Budget 2026. Reach out to your advisor for more information.