On April 14, 2026, Prince Edward Island tabled the province’s 2026-2027 Budget, proposing the following measures that impact payroll.
Personal Income Tax Rate Increase
Effective January 1, 2026, a new personal income tax bracket will apply to income over $200,000. Taxable income exceeding $200,000 will be subject to provincial income tax at a rate of 20% (an increase from the current top provincial rate of 19%).
Insurance Premium Tax Increase
The budget also proposes an increase in the insurance premium tax rates applied to gross premiums on insurance contracts as follows:
- Life, accident, and sickness insurance: 4% (up from 3.75%)
- All other insurance: 4.25% (up from 4%)
These changes are proposed to come into effect in the fall of 2026.
If these proposed measures are approved, employers should:
- Review their benefits structure and assess the potential increases to the insurance premium taxable benefit; and
- Budget for the tax increase and communicate the changes to employees.