UHT Change 2025: Canada Axes Underused Housing Tax!

Looking for clarity on the Underused Housing Tax (UHT)? For years, this one-percent federal levy has been a complex, confusing headache for Canadian & foreign property owners, second-home owners, and real estate investors alike.

It wasn’t just the 1% tax on vacant properties that caused stress; it was the bureaucratic nightmare of filing the underused housing tax return. Even if you were exempt as a Canadian citizen, the confusing paperwork, the vague definitions, and the threat of massive non-compliance penalties turned a simple annual formality into a source of constant anxiety. Thousands of Canadians who owned a cottage or a second rental unit were forced to spend money on professional advice to avoid fines that could run into the thousands of dollars. You were stuck wondering: Do I need to file? Did I miss a deadline? Is this one property going to cost me thousands in fines?

The anxiety is finally coming to an end. The federal government has listened to industry demands and, with the tabling of Budget 2025 on November 4, 2025, announced plans to officially eliminate the Underused Housing Tax starting in 2025. In this post, we break down what this significant change means for you, and when you can officially stop worrying about the annual filing deadline and the final steps needed to make this complicated tax a thing of the past.

What is the Underused Housing Tax (UHT) in Canada?

That is an excellent and essential question! The Underused Housing Tax (UHT) has been a significant point of confusion and compliance stress for many property owners across Canada since its introduction.

The UHT is an annual 1% federal tax on the value of vacant or underused residential properties in Canada.

• Effective Date: It officially took effect on January 1, 2022.
• Goal: The primary purpose of the tax was to deter non-resident, non-Canadian owners from holding residential properties that are left vacant or underused, to improve housing availability and affordability.
• Rate & Calculation: The tax is 1% of the property’s value (the greater of the assessed value or the most recent sale price), multiplied by the owner’s percentage of ownership.

Who Does the UHT Primarily Target?

The UHT is mainly aimed at Non-Resident, non-Canadian owners of residential property in Canada. However, the reason for the widespread confusion is that the law divides owners into two categories that determine their obligations:

1. Excluded Owners (No Filing Required)

These owners generally have no UHT obligations (no need to file a return or pay the tax). This group includes:

• Most Canadian citizens or permanent residents own property directly in their own name.
• Publicly traded Canadian corporations.
• Registered charities.
• Various government and municipal bodies.

2. Affected Owners (Filing Required)

These owners must file an annual UHT return (Form UHT-2900) for every property they own, even if they qualify for an exemption and owe $0 in tax. This group includes the tax’s intended target, non-Canadians, but also includes certain Canadian citizens or permanent residents if they own property in a specific way:

• A private corporation (even if incorporated in Canada).
• A partnership.
• A trust (including what are known as “bare trusts,” which is where one person holds legal title for another, like a parent holding title for a child).

It was the requirement for Canadian trusts, partnerships, and private corporations to file an annual return—even when exempt from paying the tax—that caused the most compliance anxiety and led to significant late-filing penalties for many Canadians.

Status Update: Cancellation Proposed for 2025

As mentioned earlier, the Canadian federal government, in its Budget 2025 proposal, has announced its intention to eliminate the Underused Housing Tax starting in the 2025 calendar year.

This means that if the budget passes:

• No UHT would be payable for the 2025 calendar year and beyond.
• No UHT returns would be required for the 2025 calendar year and beyond.

This measure is being taken due to the UHT’s complexity, its high administrative burden, and the existence of similar provincial and municipal vacancy taxes (such as those in BC and Toronto). See below for other similar taxes in different provinces:

British Columbia

• Speculation and Vacancy Tax
• Vancouver Empty Homes Tax

Ontario

• City of Toronto Vacant Home Tax
• City of Ottawa Vacant Unit Tax
• City of Hamilton Vacant Unit Tax
• City of Windsor Vacant Home Tax

The budget is currently progressing through the legislative process, which includes a speech by the Finance Minister on Tuesday, November 5, 2025, followed by four days of debate (including November 5, 6, 7, and 17). The final vote on the budget, which contains the measures to eliminate the UHT, is scheduled for November 17, 2025.

Stay Ahead of the Curve: Next Steps on the UHT

While the Canadian government’s proposal to end the UHT is excellent news, the final details and legislative approval are still pending in Parliament. You need real-time, confirmed information to make wise decisions about your investment property or bare trust. Don’t wait for the news to break—be the first to know. Subscribe to our newsletter today to receive a UHT status alert the moment the bill passes, along with expert guidance on how this change affects your 2025 filing.

Update: November 4, 2025, Budget 2025

The cancellation of the Underused Housing Tax (UHT) was proposed in the Canadian Federal Budget on November 4, 2025. The 2025 Budget proposes eliminating UHT from the 2025 calendar year onward. As a result, there will be no requirement to file UHT returns, and no UHT will be payable for 2025 or any subsequent years. However, all UHT requirements for the years 2022 to 2024 will still apply, including any associated penalties and interest.

Update: November 5, 2025, Question Period

During the Question Period on November 5, 2025, there was no mention of cancelling the underused housing tax in the House of Commons proceedings. The discussions in Question Period focused more on broader budget issues, government spending, tax policies, healthcare, and economic concerns. There was no specific reference to the cancellation of the underused housing tax.

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