Employer Health Tax (EHT): Ontario & BC Rates, Thresholds & Rules (2026)

The Employer Health Tax is a provincial payroll tax that funds public health care. Both Ontario and British Columbia require employers to pay EHT on remuneration paid to employees, but the rate structures, exemption rules, and filing deadlines differ between the two provinces.

If you run payroll in either province, here is what you need to know about your 2026 EHT obligations.

Quick-Reference Comparison Table (Above the Fold)

Ontario Employer Health Tax — Rates and Rules

Ontario's EHT is governed by the Employer Health Tax Act and applies to all employers with a permanent establishment in Ontario. The tax is calculated on total remuneration paid to employees who report for work in Ontario or are paid from an Ontario location. Remuneration includes salaries, wages, bonuses, commissions, taxable benefits, and stock options.

Ontario EHT Exemption

Eligible employers whose total Ontario payroll (including any associated employers) is less than $5,000,000 can claim a $1,000,000 exemption. Only payroll above $1 million is subject to EHT.

This exemption was permanently increased from $490,000 during the COVID-19 pandemic in 2020. It remains at $1 million through 2028, with the next scheduled inflation adjustment on January 1, 2029.

Employers are not eligible for the exemption if they are controlled by any level of government (with certain exceptions for organizations whose boards are independently elected) or if their total Ontario payroll (including associated employers) reaches or exceeds $5 million. Registered charities can claim the exemption regardless of payroll size.

Ontario EHT Rate Structure

Ontario uses a graduated rate that increases with the amount of taxable payroll (payroll above the $1M exemption):

For employers with total payroll exceeding $5M (no exemption), the rate is 1.95% on all Ontario payroll.

Ontario EHT Calculation Example

Employer with $2,500,000 Ontario payroll, no associated employers:

Taxable payroll = $2,500,000 - $1,000,000 = $1,500,000
Since taxable payroll exceeds $400,000, the effective rate is 1.95%:
EHT = $1,500,000 x 0.0195 = $29,250

Employer with $800,000 Ontario payroll:

Payroll is below the $1M exemption = $0 EHT owing
(Must still file annual return to claim exemption.)

Ontario Filing and Payment

The annual return is due March 15 of the following year. Employers with Ontario remuneration exceeding $1,200,000 must make monthly instalment payments by the 15th of the following month. The first instalment is not required until payroll exceeds the $1.2M threshold during the year.

Pro tip from our CPA team: Even if your payroll is below $1M and you owe no EHT, you should still file the annual return in Ontario to formally claim the exemption. Failing to file can trigger compliance inquiries from the Ontario Ministry of Finance.

British Columbia Employer Health Tax — Rates and Rules

BC's EHT replaced Medical Services Plan (MSP) premiums and has been in effect since January 1, 2019. The rate structure was significantly updated effective January 1, 2024, when the exemption threshold doubled from $500,000 to $1,000,000.

BC EHT Rate Structure (2024 Onward)

Critical difference from Ontario: In BC, once your payroll exceeds $1.5M, you pay 1.95% on your entire payroll — the $1M exemption disappears entirely. In Ontario, the $1M exemption is always deducted from payroll (as long as total payroll is under $5M).

This makes the $1.5M threshold in BC particularly punishing. An employer with $1,499,999 in BC payroll pays $29,250 in EHT (5.85% on $499,999). An employer with $1,500,001 pays $29,250 in EHT (1.95% on $1,500,001). But an employer at exactly $1.5M would be at the transition point. Careful payroll planning around this threshold can be worthwhile.

BC EHT Calculation Examples

Employer with $1,300,000 BC remuneration:

Payroll is in the notch zone ($1M-$1.5M):
Taxable amount = $1,300,000 - $1,000,000 = $300,000
EHT = $300,000 x 0.0585 = $17,550

Employer with $3,000,000 BC remuneration:

Payroll exceeds $1.5M, so 1.95% applies on total:
EHT = $3,000,000 x 0.0195 = $58,500

Employer with $900,000 BC remuneration:

Payroll is under $1M = $0 EHT owing (no registration or filing required)

BC Filing and Payment

The annual return is due March 31 of the following year. Employers must make instalment payments on June 15, September 15, and December 15 during the calendar year, with the remaining balance due with the annual return.

Employers whose first year of EHT obligation begins mid-year must register by December 31 of that year and prorate the exemption and notch rate amounts based on the number of days they had a permanent establishment in BC.

Do I Need to Pay EHT? Decision Flowchart

If you operate in both provinces and need help with multi-province payroll compliance, our team can ensure your EHT obligations are calculated and filed correctly in each jurisdiction.

Associated Employers and the Shared Exemption

Both Ontario and BC require associated employers to share the $1M exemption. Employers are generally considered associated if they are connected through common ownership (one controls the other, or both are controlled by the same person or group) or family relationships.

In Ontario, the associated group allocates the $1M exemption in any proportion they agree on. If the group's combined Ontario payroll exceeds $5M, no member can claim any exemption.

In BC, the associated group must also share the exemption. If the combined BC remuneration of the group exceeds $1.5M, the exemption is lost entirely for all members, and each pays 1.95% on their own payroll.

Pro tip: If you operate multiple related corporations and your combined payroll is approaching these thresholds, consult with your CPA about payroll structuring. Our Virtual CFO service regularly helps clients with multi-entity tax planning that includes EHT optimization.

Frequently Asked Questions

What is the EHT exemption threshold in Ontario for 2026?

$1,000,000 for eligible employers whose total Ontario payroll (including associated employers) is less than $5,000,000. The exemption has been at $1M since 2020 and is scheduled for inflation adjustment on January 1, 2029.

What is the EHT rate in BC for 2026?

Employers with BC remuneration of $1,000,000 or less are exempt. Those with payroll between $1,000,001 and $1,500,000 pay a 5.85% notch rate on the amount above $1M. Employers with payroll over $1,500,000 pay 1.95% on their total BC remuneration.

Do small businesses have to pay employer health tax?

In both Ontario and BC, employers with payroll under $1,000,000 are exempt. Ontario employers should still file to formally claim the exemption. BC employers under the threshold do not need to register or file.

When is the EHT filing deadline?

Ontario: March 15. BC: March 31. Ontario employers with payroll over $1.2M must also make monthly instalments.

Is EHT the same in Ontario and BC?

No. The key structural difference is that Ontario deducts the $1M exemption from payroll before applying the tax rate, while BC provides a full exemption under $1M but removes it entirely once payroll exceeds $1.5M. Filing deadlines, instalment schedules, and the rate structures also differ.

Can associated employers share the EHT exemption?

Yes, in both provinces. The $1M exemption must be allocated among associated group members. In Ontario, the allocation is flexible. In BC, if the group's combined payroll exceeds $1.5M, all members lose the exemption.

Final Thoughts

Need help with EHT compliance? LedgerLogic's payroll services handle EHT registration, instalment calculations, and annual return filing for businesses in Ontario and BC.