You Have a Day Job AND a Side Hustle. Now What?
More Canadians than ever are earning income outside their regular job — driving for Uber, selling on Etsy, freelancing on the side, or running a small online business. The T4 from your employer is straightforward. But that side income? It comes with its own rules, its own form, and a few surprises that catch most people off guard.
Here’s everything you need to know to file both correctly — and avoid a headache from the CRA.
Step 1: Understand What You’re Dealing With
When you have a T4 job, your employer handles most of the heavy lifting: they withhold income tax, deduct CPP, and remit EI on your behalf. You get a tidy T4 slip at the end of the year and file from there.
Side hustle income is different. No one withholds tax for you. No one pays CPP on your behalf. You are responsible for reporting every dollar earned — and for paying what you owe.
The CRA treats you as having two income streams:
- Employment income — reported on your T4
- Business/self-employment income — reported on Form T2125
Both go on the same personal tax return (T1). You’re not filing two separate returns.
The Form You Need: T2125
Form T2125 — Statement of Business or Professional Activities is what you attach to your T1 return to report side hustle income and expenses. It covers:
- Freelancers, consultants, and contractors
- Gig workers (Uber, DoorDash, TaskRabbit)
- Online sellers (Etsy, eBay, Amazon, Shopify)
- Anyone earning money from a recurring activity for profit
On T2125, you report your gross income (total earned before expenses), deduct your eligible business expenses, and arrive at your net business income. That net number is what gets taxed — and what CPP is calculated on.
The Tax Surprise Most Side Hustlers Don’t See Coming
You Pay CPP Twice
This is the biggest shock for first-time side hustlers. When you’re employed, you and your employer each pay half of CPP. When you’re self-employed, you pay both halves.
The 2026 CPP contribution rate is 5.95% per side (employee + employer). That means you’re effectively paying 11.9% on your net self-employment income above $3,500.
| Net Side Hustle Income | CPP Owed (approx.) |
|---|---|
| $5,000 | ~$178 |
| $10,000 | ~$773 |
| $20,000 | ~$1,963 |
| $30,000 | ~$3,153 |
The good news: you can deduct the employer portion of that CPP as a business expense, which offsets some of the sting.
No Tax Is Withheld All Year
Your T4 employer withholds income tax from every paycheque. Your side clients or platforms? They don’t. Every dollar hits your bank account gross.
Rule of thumb: Set aside 25–30% of your side hustle net income throughout the year. Put it in a separate savings account. That’s your tax reserve.
If your side hustle is significant (over ~$3,000/year net), consider making quarterly tax installments to the CRA to avoid a large lump-sum bill and potential interest charges in April.
GST/HST: When You Need to Register
Most side hustlers don’t think about GST/HST until it’s too late. Here’s the rule:
- General threshold: Once your gross self-employment revenue hits $30,000 in a single quarter OR over four rolling quarters, you must register for a GST/HST account
- Uber/rideshare exception: You must register from your very first dollar earned, regardless of the $30,000 threshold — CRA requires this for all ride-sharing drivers
Once registered, you collect GST/HST from clients and remit it to the CRA quarterly or annually. You can also claim back the GST/HST you paid on business expenses (called Input Tax Credits).
Not sure if you’re close to $30,000? Track your cumulative gross revenue starting from January 1 each year.
What You Can Deduct
This is where side hustlers can seriously reduce their tax bill. You can deduct any reasonable expense incurred to earn your business income. Here’s what’s typical by type:
Uber / Rideshare / Delivery
- Gas (business-use portion)
- Car insurance (business-use portion)
- Maintenance and repairs (business-use portion)
- Capital Cost Allowance (CCA) on the vehicle
- Phone plan (business-use portion)
- Platform fees/commissions taken by Uber
Keep a mileage log. Business km ÷ total km = business-use percentage.
Etsy / Online Seller
- Cost of goods (materials, supplies)
- Shipping and packaging
- Platform listing and transaction fees
- Home office (if you have a dedicated space)
- Internet (business portion)
- Photography equipment for listings
Freelancer / Consultant
- Home office expenses (dedicated space or CRA flat rate)
- Software subscriptions used for work
- Phone and internet (business portion)
- Professional development / courses
- Equipment (laptop, camera, etc.) via CCA
- Professional fees (accounting, legal)
Home office rule: The space must be used exclusively and regularly for your business. Calculate the square footage of your workspace divided by total home square footage — that’s the percentage of home expenses (rent, utilities, internet) you can deduct.
Tax Deadline: It’s Not April 30 for You
If you or your spouse has self-employment income, your filing deadline extends to June 15. However — and this trips people up — any taxes owing are still due April 30. Interest starts accruing May 1 if you owe and haven’t paid.
Practical takeaway: Calculate what you owe by late April and pay it, even if you haven’t fully finished your return yet. File the complete return by June 15.
Your Side Hustle Tax Checklist
- ☑ Track all income — every e-transfer, PayPal, platform payout
- ☑ Keep receipts for all business expenses (photo them as you go)
- ☑ Keep a mileage log if you use a car
- ☑ Complete Form T2125 with your T1 return
- ☑ Check if you’ve crossed the $30,000 GST/HST threshold
- ☑ Set aside 25–30% of net income for taxes throughout the year
- ☑ Pay any taxes owing by April 30 (even if filing by June 15)
- ☑ Consider quarterly installments if side income is significant
The Bottom Line
Having a side hustle alongside a T4 job isn’t complicated — but it does require some extra organization. The biggest mistakes are not tracking income, not saving for taxes, and missing the CPP obligation. Get those three right and you’ll sail through tax season.
Not sure how to fill out T2125 or what you can deduct for your specific situation? Book a consultation with our team — we help side hustlers and gig workers file correctly and keep more of what they earn.