What Are Tax Instalments in Canada?
What Are Tax Instalments in Canada? A Complete Guide for Businesses and Individuals
If you earn income without regular payroll deductions—or run a profitable business—there’s a strong chance the Canada Revenue Agency (CRA) expects you to pay tax instalments. This often surprises people: “Why am I paying tax before I’ve even filed my return?”
Short answer: CRA doesn’t like waiting when there’s a track record of tax owing.
This guide explains exactly how tax instalments work in Canada, who must pay them, how amounts are calculated, due dates, penalties, and practical strategies to avoid interest—without wrecking your cash flow.
What Are Tax Instalments?
Tax instalments are advance payments toward income tax or GST/HST you’re expected to owe for the year. Instead of paying a large lump sum at filing time, CRA spreads payments throughout the year based on your history.
Instalments apply to:
Corporate income tax
Personal income tax
GST/HST (annual filers only)
They are not optional once CRA determines you qualify.
Corporate Income Tax Instalments
Who Needs to Pay Corporate Instalments?
Your corporation must make instalments if either condition applies:
It owed more than $3,000 in tax in either of the previous two tax years, or
It expects to owe more than $3,000 in the current year
First-year corporation exception: New corporations do not pay instalments in their first fiscal year, even if tax owing exceeds $3,000.
Example:
Instalment Maker Inc. incorporated in 2024 and owed $4,500 for its first year.
→ No instalments in 2024
→ Instalments required in 2025
Corporate Instalment Due Dates
Monthly (default)
First payment: one month after fiscal year start
Then monthly thereafter
Quarterly (only if ALL conditions are met)
You may qualify for quarterly instalments if:
You are a Canadian-Controlled Private Corporation (CCPC)
You claimed the Small Business Deduction
Taxable income ≤ $500,000
Taxable capital ≤ $10 million
Strong compliance history with CRA
Quarterly due dates (calendar year-end):
March 31
June 30
September 30
December 31
Miss any condition and CRA pushes you back to monthly payments.
How Much Should a Corporation Pay?
Modern Axis CPA will calculate corporate instalments using one of the following approaches, depending on your situation:
Prior-year method
Instalments are based on the prior year’s tax owing, divided by 12 (monthly) or by 4 (quarterly, if eligible). This approach is commonly used when income is stable year over year.Current-year estimate method
Instalments are based on an estimate of the current year’s taxable income. This approach is appropriate when income has materially increased or decreased, but it requires careful forecasting to avoid interest.
The instalment frequency (monthly or quarterly) is determined based on CRA eligibility rules and your corporation’s profile. Proper calculation and monitoring throughout the year is critical to avoid underpayment.
Personal Income Tax Instalments
Who Needs to Pay Personal Instalments?
You may be required to make instalments if net tax owing exceeded $3,000 ($1,800 in Quebec) in either of the previous two years.
Common situations include:
Self-employed individuals
Sole proprietors
Rental property owners
Investors with untaxed income
Example:
2023 tax owing: $2,000 → no instalments
2024 tax owing: $4,500 → instalments required for 2025
Personal Instalment Due Dates
Personal instalments are due quarterly:
March 15
June 15
September 15
December 15
If the date falls on a weekend or holiday, payment is due the next business day.
How Much Do Individuals Pay?
The same three methods apply:
CRA reminder amounts (recommended)
Prior-year tax ÷ 4
Current-year estimate ÷ 4
Underestimating instalments commonly results in interest.
GST/HST Instalments (Annual Filers Only)
Who Must Pay GST/HST Instalments?
GST/HST instalments apply only if:
You file GST/HST annually, and
Net tax owing exceeded $3,000 in either of the past two years
Monthly and quarterly filers do not make instalments.
GST/HST Instalment Due Dates (Calendar Year)
April 30
July 31
October 31
January 31
How Much to Pay?
Prior year’s net GST/HST ÷ 4, or
CRA’s suggested amounts
Estimating lower payments is allowed, but interest applies if underpaid.
How to Make Instalment Payments
CRA strongly encourages electronic payments, and Modern Axis CPA recommends setting up payments directly through CRA wherever possible for accuracy, automation, and audit trail.
1. CRA Online Portals (Recommended)
You can make and automate instalment payments through CRA’s online services:
My Business Account – for corporate income tax and GST/HST
My Account – for personal income tax
Within these portals, you can:
View instalment balances and due dates
Set up pre-authorized debit (PAD) for automatic withdrawals
Schedule future payments in advance
Reduce the risk of missed or late payments
Setting up PAD through CRA ensures payments are applied correctly and on time. This is the preferred method, especially for ongoing instalment obligations.
2. Online Banking
You can also pay instalments through online banking by adding CRA as a payee and using the correct reference number:
Business Number (BN) – for corporate tax or GST/HST
Social Insurance Number (SIN) – for personal tax
Online banking works well for manual payments but requires discipline to avoid missed deadlines.
What Happens If You Don’t Pay Instalments?
CRA charges daily-compounded interest on late or insufficient instalment payments.
As of Q1 2026, CRA’s prescribed interest rate for instalment arrears is 7% annually, compounded daily. This rate is reviewed and updated quarterly, meaning it can increase or decrease depending on economic conditions.
In addition to interest, instalment penalties may apply if:
CRA’s required instalment amounts were not paid, and
The total interest exceeds $1,000
Penalties and interest can apply even if the full tax balance is ultimately paid by the filing deadline.
Common Tax Instalment Mistakes
Assuming instalments are optional
Underestimating current-year income
Missing a single payment
Confusing GST/HST instalments with income tax
Ignoring CRA notices
Key Takeaways
Owing more than $3,000 often triggers instalment requirements
First-year businesses usually receive a temporary exemption
CRA reminder amounts are the safest method
Interest compounds daily on missed payments
Proper planning prevents tax-time surprises
Need Help Managing Tax Instalments?
Instalments become complex when income fluctuates or multiple taxes are involved.
Modern Axis CPA helps individuals and businesses across Canada forecast instalments, manage cash flow, and avoid CRA interest and penalties.
Let’s talk about how we can help you stay compliant and stress-free.
Alex Ataman, CPA
Founder
Modern Axis CPA