Manitoba health and education levy 2026: $2.5M exempt, then 4.3%

What are the 2026 HE Levy rates and thresholds?

As of October 2026, an employer with total remuneration of $2.5 million or less in the year pays no HE Levy. Between $2.5 million and $5 million it pays 4.3% of the amount over $2.5 million (the notch), and above $5 million it pays 2.15% of its total remuneration, with no exemption gov.mb.ca.

The Act, current as of October 13, 2026, writes the figures into s.3(3.12) (the $2,500,000 exemption), s.3(3.14) (the 4.3% notch up to $5,000,000) and s.3(3.1.1) (the 2.15% rate). Nothing in it indexes the $2,500,000, so it moves only when the Act is amended web2.gov.mb.ca.

That history comes from Bulletin HE 001, revised January 2026 gov.mb.ca. Payroll vendor pages that still quote $2 million or $2.25 million are describing 2023, or 2024 and 2025.

What does the 4.3% notch cost at each payroll level?

The notch rate is exactly twice the 2.15% rate, so it claws the exemption back over the next $2.5 million. At $5,000,000 both methods give $107,500, so there is no cliff. Inside the notch, though, each extra dollar of payroll costs 4.3 cents, double the top rate.

The $2,650,000 and $5,500,000 rows are Manitoba's own examples gov.mb.ca.

Worked example, same payroll in both years. A client with $3,000,000 of Manitoba remuneration paid 4.3% x $750,000 = $32,250 for 2025. For 2026 it pays 4.3% x $500,000 = $21,500, a $10,750 saving. That $10,750 (4.3% of the $250,000 increase) is the saving for any payroll from $2.5 million to $4.5 million. At $4,600,000 the 2025 levy was 2.15% of everything, $98,900, and the 2026 notch gives $90,300, a saving of $8,600. Above $5 million nothing changed.

How do monthly returns work once payroll passes $2.5 million?

Every employer whose remuneration for the year is over $2.5 million files a return and pays on TAXcess by the 15th of the following month, or the next business day when the 15th falls on a weekend or holiday. It files every month, entering 0.00 for a month with no payroll. A notch employer files from January but pays nothing until cumulative remuneration passes $2.5 million, then pays 4.3% on every dollar after that point. An employer over $5 million pays 2.15% of each month's remuneration from January gov.mb.ca. The due date is set by s.5(1) of the Act web2.gov.mb.ca.

Worked example: your client pays $300,000 a month, $3,600,000 for 2026. January to August add up to $2,400,000, so those eight returns show remuneration and no tax.

The check: 4.3% x ($3,600,000 minus $2,500,000) = $47,300. The trap is a client that pays on the notch method and ends the year over $5 million. It owed 2.15% from January, and tax paid with the annual report that belonged on a monthly return draws the 10% penalty plus interest back to each original due date gov.mb.ca.

The annual report for 2026 is due March 31, 2027, filed on TAXcess with any balance, a copy of every T4 and T4A summary, and a reconciliation of the reported remuneration to those summaries (for example, pay to employees reporting outside Manitoba). An employer that dropped to $2.5 million or less after a taxable year must ask Manitoba Finance to move its account to exempt status gov.mb.ca.

Which employers are treated as one employer for the levy?

Corporations associated under s.256 of the Income Tax Act at any time in a calendar year are a single employer for the whole year (s.2(3) of the Act), so their Manitoba remuneration is combined web2.gov.mb.ca. For the control tests themselves, see associated corporations.

Manitoba's examples: Corp A pays $1.4 million and Corp B $2.0 million. The group's $3.4 million is in the notch, so the two share $38,700 (4.3% x $900,000). Raise them to $3.3 million and $3.4 million and the group is over $5 million: each pays 2.15% of its own payroll, $70,950 and $73,100 gov.mb.ca.

Three rules catch accountants. Two corporations associated only through a third corporation are still associated for the levy, even where s.256(2) relief helps for the small business deduction. Corporations treated as not associated under the saving rules in s.256(3) to (6) are not associated for the levy either. And partnerships are pulled in: a corporate partner that, with its associated corporations, shares in more than 50% of a partnership's profits or losses brings that partnership, itself, its associated corporations and its other controlled partnerships into one group. A related group controlling a partnership does the same through each corporate partner holding 25% or more gov.mb.ca.

An individual is not a corporation, so a shareholder who also employs staff directly as a sole proprietor gets a separate $2.5 million exemption for that payroll. The group files a declaration of how it shared the exemption or notch with the annual report (s.5(2.6)), on Schedule A, with one member designated to file. If the declaration is missing or unreasonable, Manitoba Finance allocates it under s.2(5.2) gov.mb.ca. Once the group is over $2.5 million, every member registers and files its own monthly returns gov.mb.ca.

What counts as Manitoba remuneration?

Remuneration is anything included in employment income under s.5(1), 6 or 7 of the Income Tax Act, paid to employees who report for work at a Manitoba permanent establishment, or who report nowhere but are paid from or through one. Pay to employees who report to an establishment outside Manitoba is out, wherever the employee lives gov.mb.ca.

The list is Manitoba's own, from Bulletin HE 002 gov.mb.ca. For an owner manager, salary counts and dividends don't, and a proprietor's or partner's own business profit is not remuneration at all. Payments to genuine independent contractors are out too, tested much like the CRA's employee or contractor factors.

What changes for a part year employer or an outside contractor?

An employer without a Manitoba permanent establishment for the whole year prorates the exemption and the notch by days (s.3(3.15)). Manitoba's example, 100 days: the exemption is $684,932 and the notch runs to $1,369,863. Payroll of $300,000 owes nothing, $700,000 owes 4.3% x $15,068 = $648, and $1,400,000 owes 2.15% of all of it, $30,100 gov.mb.ca. This catches contractors from other provinces, businesses that start or stop partway through the year, and a sole proprietor who incorporates.

A permanent establishment is broader than an office. Using substantial machinery or equipment in Manitoba at any time in a month creates one for that month, and land or premises a corporation owns or leases in Manitoba is one gov.mb.ca.

A corporation that becomes associated partway through the year can split the year under s.3(3.10). In Manitoba's example, Corps A and B associate on August 1: the 212 day period before gets a $1,452,055 exemption, so Corp B's $1.5 million owes $2,602, and the new group shares the remaining $1,047,945 for the rest of the year gov.mb.ca. Leaving a group is different. Bulletin HE 003 says the s.3(3.10) split never applies to a corporation that disassociates, so the whole year rule keeps it in the group's total gov.mb.ca. The Act adds one exception the bulletin doesn't mention: under s.3(3.16), a corporation associated at the start of the year that stops being associated because of a change in control, and is associated with no corporation for the rest of the year, gets $2,500,000 x days left / days in the year as its own exemption for the period after, and the old group shares the remainder for the period before. If it joins another group, or leaves without a change in control, the whole year rule applies web2.gov.mb.ca.

A contractor from outside Manitoba that must give retail sales tax security also secures the levy, up to 2.15% of the contract price. Before final payment to such a subcontractor, the general contractor or owner needs a Manitoba Finance clearance letter; release the holdback without one and it is liable for the unpaid tax gov.mb.ca.