Most Canadians have taxes withheld at source — their employer deducts CPP, EI, and income tax from every paycheque and remits it to CRA throughout the year. By the time April 30 arrives, the balance owing is typically small.
But for self-employed individuals, investors, retirees receiving pension income, and anyone with significant income that is not subject to withholding, the full tax bill lands in one lump sum at tax time. This creates a cash-flow problem for CRA and a potential hardship for taxpayers who haven't saved enough to cover a large year-end balance.
To address this, CRA requires certain taxpayers to remit income tax in quarterly instalments throughout the year — essentially paying tax as you earn, rather than all at once.
CRA requires you to pay quarterly instalments if your net tax owing exceeds $3,000 in the current tax year and in either of the two preceding tax years. Quebec residents use a $1,800 threshold for provincial tax because Quebec administers its own income tax separately.
"Net tax owing" means your total federal and provincial income tax payable minus any amounts withheld at source by your employer or payer. If you have a job that withholds taxes but also have significant rental, investment, or self-employment income on the side, only the portion not covered by withholding counts toward the $3,000 threshold.
Common situations that trigger the instalment requirement include:
For most individual taxpayers, instalment payments are due four times per year. Missing a due date — or paying less than required — triggers interest from the day the payment was due, not from tax filing deadline.
| Instalment | Due Date | Notes |
|---|---|---|
| 1st quarter | March 15 | Covers January–March income period |
| 2nd quarter | June 15 | Covers April–June income period |
| 3rd quarter | September 15 | Covers July–September income period |
| 4th quarter | December 15 | Covers October–December income period |
| Final balance | April 30 (personal) | Any remaining balance due with tax return |
When a due date falls on a weekend or statutory holiday, CRA accepts the payment on the next business day without penalty. If you are self-employed and your filing deadline is June 15, your instalment due dates remain unchanged — only the tax return filing deadline is extended, not the instalment due dates.
CRA allows taxpayers to use any of three approaches to determine how much to pay each quarter. Choosing the right method can legally reduce the amount you pay in advance without incurring interest — provided the final balance owing at filing is correct.
CRA calculates suggested instalment amounts based on your prior two years of tax returns and prints them on the reminder letters it mails in February and August. The February letter covers the March and June instalments; the August letter covers September and December. If you pay exactly the amounts CRA suggests, you will not be charged interest even if you owe a balance at filing.
This method is the simplest and works well when your income is relatively stable from year to year.
Under this approach, you base all four quarterly payments on your net tax owing from the immediately preceding tax year, dividing that amount by four for each instalment. This is a useful strategy when your income is rising, because you pay based on last year's (lower) tax liability. You will owe a balance at filing, but no instalment interest applies provided you paid the correct quarterly amounts using last year's figures.
If your income is expected to be significantly lower than the prior year — for example, because you closed a business, sold a rental property, or retired — you can base your instalments on your best estimate of the current year's tax liability. This reduces or eliminates unnecessary prepayments. However, if your estimate turns out to be too low and your actual balance owing exceeds the safe amounts from Methods 1 or 2, CRA will charge instalment interest on the underpaid amount.
CRA charges compound daily interest on late, insufficient, or missing instalment payments at the prescribed interest rate, which is set each quarter and has ranged from 8% to 10% in recent years. Importantly, this interest is charged from the original due date — not from April 30 — which means a missed March 15 payment can accumulate over a year of interest before you even file your return.
There is one meaningful offset: if you overpay one instalment, the excess earns instalment credit that can reduce the interest charged on a later underpayment. This credit is calculated at the same prescribed rate, so strategically timing larger payments can partially shelter smaller shortfalls.
Unlike instalment interest, which CRA cannot waive simply because you didn't know about the requirement, a 50% surcharge on interest applies when the total instalment interest in a year exceeds $1,000. This surcharge can be waived under the taxpayer relief provisions if exceptional circumstances prevented timely payment.
| Scenario | Interest Consequence | Avoidance Strategy |
|---|---|---|
| Missed quarterly payment | Compound daily interest from due date at prescribed rate | Pay CRA's suggested amount by each deadline |
| Underpaid quarterly amount | Interest on the shortfall from due date | Use prior-year method or CRA suggested amounts |
| Overpaid quarterly amount | Instalment credit earned (offsets later shortfalls) | N/A — overpayment refunded after filing |
| Instalment interest > $1,000 | 50% surcharge added on top of regular interest | Ensure timely payments throughout the year |
CRA offers several ways to remit your quarterly instalments. The most convenient options for most taxpayers are online banking (by adding the CRA as a payee and using your SIN as the account number) and through My Account on the CRA website using a pre-authorized debit arrangement.
You can also pay in person at most Canadian financial institutions or by mailing a cheque to CRA's tax centre, though mailed payments must arrive by the due date — not merely be postmarked by that date.
When making a payment through online banking, select the correct payee code: "CRA (revenue) – 2025 tax year – instalment" to ensure the funds are applied to instalments rather than a previous year's balance or a different account type. Misapplied payments are a common cause of unexpected instalment interest notices.
Instalment obligations catch many taxpayers off guard — particularly those who are newly self-employed, who have recently started earning significant investment income, or who have just retired and are drawing from multiple income sources. Misjudging your instalment amounts in either direction has real consequences: overpaying ties up cash you could be investing, while underpaying triggers compounding interest that accumulates quietly until your notice of assessment arrives.
Swift Accounting's tax professionals work with self-employed Calgarians, landlords, investors, and incorporated business owners to calculate accurate quarterly instalments, choose the right calculation method for your situation, and avoid the interest charges that come with getting it wrong. We also review your prior year's tax position to determine whether instalment obligations apply and help you set up a simple savings plan to cover them without disrupting your cash flow.
If you received a CRA instalment reminder letter and aren't sure what it means — or if you are managing self-employment income for the first time — contact Swift Accounting today. A short conversation with one of our tax professionals can save you significant interest and eliminate the uncertainty around one of Canada's least-understood tax obligations.