Key tax updates from Nova Scotia’s 2026–27 budget

Nova Scotia’s 2026–27 budget

On February 23, 2026, Nova Scotia (NS) released its 2026–27 budget. The budget continues with the province’s focus on affordability, competitiveness, and long-term investment, while introducing several targeted tax measures affecting individuals and businesses. 

The province is projecting a fiscal deficit of $1.19 billion for 2026–27 (before contingency). Net debt is expected to rise to $27.9 billion by the end of the fiscal year, reflecting planned capital investments and the projected deficit. This represents a notable increase compared to prior estimates for 2025–26. 

Key 2025 measures continuing into 2026 

In 2025, the following measures were announced and budget 2026 confirmed their continued application for the coming year. 

• Indexation of tax brackets and credits - NS will continue indexing personal income tax brackets and certain nonrefundable tax credits as done in 2025. The indexation rate was 3.1% for 2025 and will be 1.6% for 2026, based on inflation. 

  Indexed amounts include the basic personal amount, spousal or common law partner amount, eligible dependent amount, age amount, and infirm dependent amount. 

• Expanded access to key non-refundable credits - Effective for the 2025 taxation year and later, NS removed income-based reductions for the Basic Personal Amount (BPA), Age Amount, Spousal Amount, and Eligible Dependent Amount. As a result, eligible taxpayers can now claim the full value of these credits regardless of income level. 

• Small business tax rate reduction and threshold increase - Effective April 1, 2025, NS reduced the small business corporate income tax rate from 2.5% to 1.5% and increased the small business income threshold from $500,000 to $700,000. Phase out of small business rate is consistent with Federal. 

• Harmonized Sales Tax (HST) reduction - Effective April 1, 2025, NS reduced the provincial portion of the HST from 10% to 9%, lowering the overall HST rate from 15% to 14%.  

New measures 2026 

Personal tax measures 

No changes to personal income tax rates were announced in the budget. The current personal combined income tax rates for 2026 are outlined below: 

Business tax measures 

• Capital Investment Tax Credit - NS will extend the sunset date of the Capital Investment Tax Credit to December 31, 2035. The credit will continue to be available for qualifying property acquired after the sunset date, provided a preapproval application is submitted and approved before that date. 

• Vaping product tax harmonization - Effective April 1, 2026, NS will harmonize its vaping product tax with the federal system under the Coordinated Vaping Product Taxation Agreement (CVPTA). Under this approach, the provincial duty will mirror the federal duty and will be administered and collected by the federal government. 

  NS’s existing provincial vaping product tax will end on March 31, 2026. 

Other notable measures 

• Financial Institutions Capital Tax (FICT) increase - For tax years starting on or after November 1, 2026, the FICT rate will increase from 4% to 6%. The tax applies to banks, loan corporations, and trust corporations with a permanent establishment in Nova Scotia. 

• Electric and hybrid vehicle levy - Effective October 1, 2026, a new Electric and Hybrid Vehicle Levy will apply at registration and every two years upon renewal: 

  • $500 for fully electric vehicles 

  • $250 for electric hybrid vehicles 

What this means for you 

Nova Scotia’s 2026–27 budget seeks to provide personal tax relief through indexation and expanded access to credits, while maintaining support for small businesses through lower tax rates and a higher small business income threshold. At the same time, the province has introduced targeted revenue measures affecting specific industries and activities. 

Individuals and businesses should review these measures carefully to assess the potential cash flow, compliance, and planning implications for upcoming taxation years. Your Baker Tilly advisor is available to help you navigate these changes.