Most Canadians are used to the routine: file your tax return and pay any balance owing by April 30. But if you earn income that does not have enough tax withheld at source, from rental properties, investments, self-employment, or pension payments, the CRA may require you to prepay your taxes in quarterly instalments throughout the year.
At Cassar CPA, we work with small business owners, incorporated professionals, and investors across the Greater Toronto Area who frequently receive instalment reminders from the CRA. Many are caught off guard the first time it happens. This article explains who has to pay, when the payments are due, how to calculate the amount, and what happens if you miss a deadline.
Who Has to Pay Instalments?
You are generally required to pay personal income tax by instalments for 2026 if your net tax owing is more than $3,000 in 2026 and was also more than $3,000 in either 2025 or 2024. In Quebec, the threshold is $1,800 instead of $3,000.
The $3,000 threshold refers to your net tax owing, the total tax on your return minus amounts already withheld at source (such as payroll deductions from employment income) and any credits. If your employer deducts enough tax from your paycheque to cover your full tax liability, you will not owe instalments regardless of how much you earn. Instalments are triggered when a significant portion of your income does not have tax withheld.
The most common situations where instalments apply include: rental income, self-employment or freelance income, investment income (interest, dividends, capital gains), pension income without sufficient withholding, and income from a business operated as a sole proprietorship or partnership. If you have recently started earning income from any of these sources, you may not receive an instalment reminder right away, but the obligation can arise as soon as you meet the $3,000 threshold in two consecutive years.
2026 Due Dates
For most individuals, personal tax instalments are due quarterly on the following dates: March 15, June 15, September 15, and December 15. If a due date falls on a weekend or public holiday recognized by the CRA, the payment is considered on time if received on the next business day.
The CRA sends instalment reminders twice a year: in February (for the March and June payments) and in August (for the September and December payments). These reminders include suggested payment amounts based on your prior-year tax returns. However, receiving a reminder is not what creates the obligation, the obligation exists as soon as you meet the $3,000 threshold. If you know you will owe, do not wait for the reminder to start paying.
Farmers and fishers have a different schedule: one annual instalment payment due December 31 of the current tax year, provided farming or fishing is their main source of income.
How Much Do You Pay?
The CRA offers three calculation methods for personal instalments. You can choose whichever one works best for your situation.
No-calculation option: Simply pay the amounts shown on the instalment reminders the CRA sends you. This is the easiest approach and is based on your prior-year tax returns.
Prior-year option: Divide your prior year’s net tax owing by four and pay that amount each quarter. This works well if your income is relatively stable from year to year.
Current-year option: Estimate your current year’s net tax owing and divide by four. This is the most accurate method if your income has changed significantly, but it carries risk: if your estimate turns out to be too low, you may be charged instalment interest on the shortfall.
You can also use a hybrid approach where the March and June payments are based on the second preceding year’s tax, and the September and December payments are adjusted to reflect the prior year’s actual figures. The CRA’s instalment reminders typically use this approach.
Interest and Penalties for Late or Insufficient Payments
This is the part that catches people. If you are required to pay instalments and you either miss a payment or pay less than required, the CRA charges instalment interest at the prescribed rate, compounded daily. For Q1 and Q2 of 2026, the prescribed interest rate on overdue amounts is 7%.
Instalment interest is calculated on the difference between what you should have paid and what you actually paid, from the date the payment was due until it is received. You can offset late payments by making early or larger payments in other quarters, the CRA gives credit for early overpayments when calculating interest.
If your total instalment interest for the year exceeds $1,000, the CRA may also assess a penalty. The penalty is calculated as the greater of $1,000 or 25% of the instalment interest that would have been charged if you had made no payments at all, minus your actual instalment interest, divided by two. The formula is deliberately complex, but the takeaway is straightforward: missing instalments on a tax bill of any significant size gets expensive quickly.
Your Annual Return Balances It Out
Instalments are not a separate tax, they are advance payments toward your annual tax liability. When you file your tax return for the year, the CRA totals all instalment payments you made and applies them against your final tax owing. If you overpaid through instalments, you will receive a refund or credit. If you underpaid, you will owe the difference plus any applicable interest.
You can still claim all the deductions, credits, and benefits you are entitled to on your annual return. RRSP contributions, charitable donations, medical expenses, and other deductions reduce your final tax liability, and if those deductions bring your total tax below what you paid in instalments, you get the excess back.
A Note on Corporate Tax Instalments
Corporations have their own instalment requirements, which are separate from personal instalments. Generally, a corporation must pay income tax in monthly instalments if its federal tax owing in the current or preceding year exceeds $3,000. Small Canadian-controlled private corporations (CCPCs) may qualify to make quarterly rather than monthly payments under certain conditions. Corporate instalment due dates are the last day of each complete month (or quarter, for eligible small CCPCs) of the corporation’s taxation year.
The same interest and penalty rules apply: late or insufficient corporate instalments attract daily-compounding interest at the prescribed rate, and penalties may apply if instalment interest exceeds $1,000. If your business is incorporated, your accountant should be calculating and reminding you of these obligations as part of your regular compliance cycle.
Practical Tips
Set up automatic quarterly payments through CRA My Account or your financial institution’s bill payment system. Automating the payments removes the risk of forgetting a deadline. If your income varies significantly from year to year, review your instalment amounts with your accountant each spring to ensure you are not overpaying or underpaying. And if you are new to instalments, do not ignore the first reminder, the obligation is real, and the interest charges start the day after the due date.
How Cassar CPA Can Help
Tax instalments are one of those obligations that feel manageable once you understand the rules, but can create unnecessary stress and cost if they are overlooked. At Cassar CPA, we help clients across Toronto and Oakville stay ahead of their instalment obligations as part of our year-round advisory services. Whether you are receiving your first instalment reminder or managing instalments across personal and corporate accounts, our team can ensure you are paying the right amount at the right time.