BC Employer Health Tax exemption doubled to benefit more small businesses

Big changes are coming to the recently implemented Employer Health Tax (EHT) in British Columbia starting in 2024. This measure is effective immediately.

As part of the 2024 provincial budget, BC Minister of Finance Katrine Conroy announced today that the exemption threshold for the EHT will be substantially expanded from the current threshold of businesses with annual payrolls of $500,000 to $1 million.

This doubling of the exemption means significantly more small businesses will be exempt from paying the Employer Health Tax. It is estimated that 90% of businesses will now be exempt from the tax, which has added to business costs in recent years.

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Furthermore, businesses with payrolls between $1 million and $1.5 million will continue to be partially exempt and see a decrease in EHT obligations. The notch rate for businesses with payrolls between $1 million and $1.5 million has now increased from 2.925% to 5.85%.

This relief comes at a time when businesses, especially small and growing businesses, are seeing major impacts from the growing cost of goods, services, transportation, and labour, and from rising property taxes and rents due to escalating land values. This is in addition to slower consumer spending due to rising housing and living costs.

Recent reports show more businesses, particularly small businesses, are increasingly reliant on debt to keep their doors open. And previous debt is also impacted by the current interest rate climate.

The expanded EHT exemption could particularly help support independent restaurants and cafes, which have seen a recent spate of closures.

“Here in British Columbia, small business is big business. Small businesses create first jobs that turn into careers. They sponsor local sports teams. And they employ more than one million people in the province,” said Conroy during her budget speech today.

“However, it’s been a tough couple of years. But now, small businesses are being squeezed but inflation and high interest rates. That’s why our government is taking another step to help small and growing businesses with costs. We’ve been hearing from business leaders that these savings will help to recruit and retain talent.”

Even with the new exemptions, EHT revenue is still forecast to increase to $2.8 billion in the 2024/2025 fiscal year — up from $2.77 billion in 2023/2024, with further growth to $2.95 billion in 2024/2025 and $3.07 billion in 2025/2026.