What Are Tax Installments in Canada? A Complete Guide for Businesses and Individuals
What Are Tax Instalments in Canada? A Complete Guide for Businesses and Individuals
If you’re running a business or earning income without regular source deductions in Canada, there’s a good chance the Canada Revenue Agency (CRA) expects you to make tax instalment payments. You might have received a notice and wondered, “Why do I owe money before I even file my tax return?”
In this guide, we’ll break down everything you need to know about Canadian tax instalments—what they are, who needs to pay them, how they’re calculated, when they’re due, and what happens if you don’t pay on time.
What Are Tax Instalments?
Tax instalments are prepayments toward your income tax or GST/HST liability. Rather than waiting until year-end to pay your tax all at once, CRA requires eligible taxpayers to make periodic payments throughout the year based on previous income levels.
Instalment payments apply to:
Corporate income tax
Personal income tax
GST/HST (for annual filers only)
Corporate Income Tax Instalments
Who Needs to Pay?
Your corporation must pay tax instalments if it:
Owed more than $3,000 in either of the past two tax years, or
Is expected to owe more than $3,000 this year
First-year exemption: New corporations do not have to make instalments during their first year.
Example:
Instalment Maker Inc. incorporated in 2024 and owed $4,500 that year. Since it’s their first year, no instalments were required in 2024. But for 2025, CRA expects them to make instalment payments.
When Are Corporate Instalments Due?
Monthly instalments: Due one month after the start of your fiscal year, then monthly.
Quarterly instalments: Available only if all the following apply:
You’re a Canadian-Controlled Private Corporation (CCPC)
You claimed the Small Business Deduction
Taxable income ≤ $500,000
Taxable capital ≤ $10 million
Perfect compliance history
Quarterly due dates (calendar year-end):
March 31
June 30
September 30
December 31
How Much to Pay?
CRA offers three options:
No-calculation option:
Follow CRA’s instalment reminders. Safe, interest-free if followed.
Prior-year option:
Divide last year’s tax owing by 12 (monthly) or 4 (quarterly).
Current-year option:
Estimate your tax for the current year and divide accordingly. Risky if your estimate is off.
Tip: When in doubt, stick with CRA’s recommended payment to avoid interest.
Personal Tax Instalments
Who Needs to Pay?
If you owe more than $3,000 in net tax (or $1,800 in Quebec) in either of the last two years, you may need to make personal tax instalments.
This applies to:
Self-employed individuals
Sole proprietors
Rental property owners
Investors and others with untaxed income sources
Example:
In 2023, you owed $2,000. No issue.
In 2024, you owe $4,500. CRA now expects instalments in 2025.
When Are Personal Instalments Due?
Instalments are due on:
March 15
June 15
September 15
December 15
If these fall on a weekend or holiday, payment is due the next business day.
How Much to Pay?
Three methods, just like corporate tax:
No-calculation option:
Use CRA’s suggested amount.
Prior-year option:
Divide last year’s tax owing by four.
Current-year option:
Estimate current-year taxes, divide by four. Risky if you underpay.
GST/HST Instalments
Who Needs to Pay?
GST/HST instalments apply only if:
You file GST/HST annually, and
Your net tax owing exceeded $3,000 in either of the past two years
Monthly or quarterly filers do not need to make instalments.
When Are GST/HST Instalments Due?
They are due one month after the end of each fiscal quarter.
For calendar-year filers:
April 30
July 31
October 31
January 31
How Much to Pay?
Divide your prior year’s net GST/HST owing by four
Or follow CRA’s suggested amounts
Estimating a lower amount is allowed, but if you underpay, CRA may charge interest.
How to Make Instalment Payments
You can make tax instalment payments in several ways:
For Corporations, Individuals, or GST/HST:
Online banking:
Add CRA as a payee using the appropriate account number (BN for corporate or GST/HST; SIN for personal).
CRA online portals:
My Business Account for corporations or GST/HST
My Account for personal tax
You can set up pre-authorized debits for automatic withdrawals
Mailing a cheque:
Still accepted—ensure you include a remittance voucher and the correct account/reference number.
What Happens If You Don’t Pay?
CRA charges daily-compounded interest on missed or underpaid instalments.
You may also face instalment penalties if:
You used an incorrect calculation method (i.e., ignored CRA’s suggested amount), and
Your interest owing exceeds $1,000
Avoid penalties by following CRA’s recommended payment amounts—even if your final tax bill ends up higher or lower.
Key Takeaways
If you’ve owed more than $3,000 in any recent year, instalments are probably required.
First-year businesses or new high-income individuals usually get a grace period.
CRA offers multiple payment options and calculation methods, but using their reminders is the safest approach.
Late or insufficient payments can trigger interest and penalties.
Staying on top of instalments protects your cash flow and prevents tax-time surprises.
Need Help Managing Tax Instalments?
Understanding and managing instalment payments can be overwhelming, especially when your income changes year to year. If you need guidance or want to ensure you’re calculating and paying correctly, the team at ModernAxis can help.
We work with both individuals and businesses across Canada to navigate CRA requirements efficiently—and penalty-free.
Let’s talk about how we can help you stay compliant and stress-free.