T4s, T5s, and Year-End Dividends
What Canadian Business Owners Need to Know for 2025
Taxation

As the year winds down, Canadian business owners face one last big administrative hurdle before the holidays — preparing T4s, T5s, and year-end dividends.

Whether you’re paying yourself, your employees, or your shareholders, the last thing you want is to miss a deadline or mix up what goes where. The CRA takes these filings seriously, and small errors can lead to costly headaches come tax time.

So let’s break down what you need to know about T4s, T5s, and dividend decisions before December 31, 2025.

T4s vs. T5s: What’s the Difference?

It’s easy to mix them up — but they serve very different purposes:

1. T4 slips report employment income — salary, wages, and taxable benefits.
2. T5 slips report investment income — like dividends, interest, or certain shareholder payments.

If you pay yourself a salary, you’ll issue yourself a T4. If you take dividends, that’s a T5. Some owner-managers will even issue both, depending on their compensation mix.

Who Needs a T4?

You must issue a T4 slip to anyone who:

1. Earned wages or a salary from your company
2. Received taxable benefits (like health premiums or car allowances)
3. Was paid bonuses or vacation pay

Even if you only paid yourself — yes, you still need to issue a T4 if you took a salary.

T4 slips and summaries are due to the CRA by February 28, 2026.

Who Needs a T5?

A T5 slip is issued when:

1. You pay dividends to shareholders (including yourself)
2. You pay interest from the company to an individual
3. You pay other investment income (like certain loans to shareholders)

T5 slips are also due by February 28, 2026, but the related dividends must be paid before December 31, 2025 to count for the 2025 tax year.

Should You Pay a Dividend Before Year-End?

Ah, the big question every owner asks. There’s no one-size-fits-all answer, but here’s what to consider:

✅ Reasons to Pay 2025 Dividends Before December 31:

1. To withdraw funds from the company tax-efficiently this year
2. To use up low-rate personal tax brackets before year-end
3. To balance out salary and dividend income for RRSP or CPP planning

⚠️ Reasons to Wait Until 2026:

1. Your company’s income is lower this year (deferral could make sense)
2. You expect personal income to drop next year
3. You’re uncertain about 2025 final profits

A short chat with your accountant in November can help you pinpoint the sweet spot — because paying dividends too early or too late can mean leaving money on the table.

How to File T4s and T5s

Most small business owners use payroll or accounting software to issue and file slips electronically:

1. T4s: through your payroll provider or CRA’s “Internet File Transfer” system.
2. T5s: often prepared manually or through your accounting software — both slip and summary must be submitted.

Keep copies for your records and give recipients their slips by the same February 28 deadline.

Common Mistakes to Avoid

1. ❌ Forgetting to issue yourself a T4 or T5 as a shareholder-owner
2. ❌ Reporting dividends in the wrong year
3. ❌ Failing to remit source deductions for salaries
4. ❌ Missing the filing deadline — CRA penalties start at $100 and increase with the number of slips

💡 Related Reading:

• Bookkeeping for Canadian Small Businesses — Organize your records before year-end.

• Understanding the Personal Residence Exemption in Canada — another smart tax topic before year-end.

Final Word

T4s and T5s might not be glamorous, but they’re critical for staying compliant — and avoiding last-minute panic in February.

November is the perfect time to review your salary-versus-dividend strategy, ensure all slips will be filed correctly, and wrap up your 2025 tax reporting cleanly.

Your future self (and your accountant) will thank you.

Disclaimer!

The information in this article is general in nature. We recommend that you discuss your situation with an advisor, as every business is unique.