If you're self-employed, have investment income, rental income, or any income without sufficient tax withheld at source, the CRA may require you to make quarterly tax installment payments. Instead of paying all your tax at filing time in April, you pay it in four instalments throughout the year. This guide explains who must pay, when, how much, and what happens if you don't.
Quarterly installments are required when your tax owing exceeds $3,000 in the current year and at least one of the two prior years. Common situations where this applies:
If your tax owing was under $3,000 in both previous years, you are not required to make installments — even if you owe more this year. But you may choose to pay voluntarily to avoid a large April bill.
Quarterly installment payments are due on:
If the due date falls on a weekend or holiday, the payment is due the next business day. Payments must be received by the CRA by the due date — not just mailed. Use the CRA's My Payment service or your bank's bill payment feature with enough lead time to ensure funds arrive on time.
The CRA offers three acceptable calculation methods. You can use whichever results in the lowest installment amounts without penalty, as long as your final tax is paid in full by April 30.
The CRA sends installment reminders in February (for March and June payments) and August (for September and December payments). If you pay exactly the amounts shown on these reminders, you will never face installment interest or penalties — even if you end up owing more at filing. This is the safest and simplest option if you don't want to do calculations.
Pay one-quarter of your total tax owing from the prior year with each installment. If you owed $16,000 last year, pay $4,000 each quarter. This is straightforward if last year was similar to this year, but you may owe a balance at filing if this year's income is higher.
Estimate your current year's total tax liability and pay one-quarter each quarter. If your estimate is accurate, you'll owe nothing at filing. If you underestimate, you may owe installment interest on the shortfall. This method works best for people whose income is fairly predictable.
If you don't pay the required installments by the due dates, the CRA charges installment interest at the prescribed rate (currently 8% per year, compounded daily). This interest is charged from the installment due date to when you actually pay or to April 30 of the following year, whichever is earlier.
If your installment interest exceeds $1,000, you may also face a 50% surcharge penalty on the amount by which interest exceeds the greater of $1,000 or 25% of the interest that would have been payable had you made no installments at all. Avoid this by using the reminder method or one of the other approved calculation methods.
Installment interest on business income tax is deductible as a business expense on your T2125 for the following year. This partially offsets the cost of late or insufficient payments, but it's still better to pay on time.
Several convenient payment methods are available:
The best practice for self-employed Canadians is to set aside 25-35% of every payment received into a dedicated savings account. This covers income tax (federal + provincial) plus the self-employed CPP contribution. When installment dates arrive, transfer from this tax savings account. This approach eliminates the stress of large lump-sum payments and ensures you always have funds available.
Quebec residents must make installments for both federal (CRA) and provincial (Revenu Quebec) tax separately. The Quebec threshold is $1,800 in provincial tax owing (rather than $3,000). Quebec installment dates generally align with federal dates. You'll receive separate reminder notices from Revenu Quebec.
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