Updated: April 2025  |  bremo.io financial guides

Canada Tax Instalments 2025

Most employed Canadians have income tax withheld automatically from their paycheques, so their tax is paid throughout the year without any extra action. However, some Canadians — particularly the self-employed, retirees, investors, and those with significant non-employment income — must make quarterly tax instalment payments to prepay their expected tax liability. Failing to do so results in instalment interest charges from the CRA.

Who Must Pay Tax Instalments?

You are required to pay quarterly tax instalments if your net tax owing (federal plus provincial, after credits but before any instalments) exceeds:

• $3,000 federally (or $1,800 in Quebec) for the current year AND either of the two preceding years

Common situations that lead to instalment requirements include:

• Self-employment or freelance income with no tax withheld at source
• Significant investment income (dividends, interest, capital gains) from non-registered accounts
• Rental income where insufficient tax is withheld
• Pension income where you chose not to have tax withheld
• Receiving both OAS and employment income simultaneously

Quarterly Instalment Due Dates 2025

How to Calculate Your Instalment Amount

There are three CRA-approved methods for calculating quarterly instalments. You can use whichever results in the lowest instalment payments without triggering interest:

Method 1: Prior Year Method (Simplest)

Pay one-quarter of your prior year's net tax owing in each of the four quarters. If the CRA sends you an instalment reminder notice, the amounts shown are typically based on this method using your most recent assessed tax.

Method 2: Current Year Method

Estimate your current year's tax owing and pay one-quarter of that estimated amount each quarter. This is useful if your income has dropped significantly from the prior year.

Method 3: Prior-Prior Year Method (No-interest method)

Pay two-thirds of your net tax from two years ago split between the first two instalments (March and June), then the remaining balance based on the prior year for the last two instalments (September and December). The CRA will not charge instalment interest if you follow this method exactly, even if it results in a balance owing on your return.

CRA Instalment Reminder Notices

The CRA sends instalment reminder notices in February and August showing the amounts and dates. You do not need to use the amounts on the reminder — you can use any approved calculation method. The reminders are a convenience, not a bill for a fixed amount.

How to Pay Tax Instalments

Pay instalments the same way you would pay a regular tax balance:

• Online banking — search for "Canada Revenue Agency" as a payee and use your SIN as the account number
• CRA My Payment — online payment through participating financial institutions
• Pre-authorized debit through My Account
• In person at a financial institution or Canada Post

When making instalment payments online, specify the payment type as "tax instalment" (not "balance owing") to ensure it is applied correctly.

Instalment Interest and Penalties

If you miss instalment deadlines or pay too little, the CRA charges compound daily interest at the prescribed rate (typically the Bank of Canada rate plus 4%) on the shortfall from each due date to April 30 of the following year. If your instalment interest charges exceed $1,000, a penalty may also apply.

Overpaying instalments is interest-free — the CRA simply applies the overpayment to your balance owing at filing time or issues a refund.