CRA Tax Instalments Explained: How to Avoid 7% Interest This December

Quick answer: Individuals must pay CRA tax instalments if their net tax owing is more than $3,000 in the current year and in either of the two previous years. Instalments are due on 15 March, 15 June, 15 September and 15 December. Corporations generally pay monthly, or quarterly if they’re a small CCPC that qualifies. Late or short instalments are charged interest at the prescribed rate — 7% a year, compounded daily, in late 2026 — so a catch-up payment before 15 December can save real money.

Key takeaways

• Self-employed people, landlords, investors and retirees are the most common instalment payers.
• If you follow the CRA’s “no-calculation” reminder amounts exactly, you won’t be charged instalment interest, even if you end up owing more.
• Corporations owing more than $3,000 must pay instalments, usually monthly.
• Annual GST/HST filers with $3,000 or more of net tax pay quarterly GST/HST instalments.
• An early or larger later payment can offset interest from a missed one.

Why instalments exist

Employees have tax withheld from every paycheque. If you earn income without withholding — self-employment, rental income, investment income, pensions without enough withholding, or a corporation’s profits — the CRA wants its share during the year too, not all at once in April. Instalments are how you pay as you go.

Do you have to pay instalments? (Individuals)

You must pay instalments for 2026 if your net tax owing is more than $3,000 for 2026 and was more than $3,000 in either 2025 or 2024. (The threshold is $1,800 in Quebec.)

“Net tax owing” is your total federal and provincial tax, minus tax withheld at source and certain credits. In Ontario, provincial tax is included, so it’s easy to cross the threshold.

Who usually gets caught

• Self-employed consultants, contractors, realtors and gig workers.
• Landlords with rental income.
• Incorporated owners who pay themselves dividends (no withholding on dividends).
• Investors with interest, dividends or capital gains in non-registered accounts.
• Retirees whose pensions, RRIF withdrawals or OAS don’t have enough tax withheld.
• People with two jobs, where each employer withholds as if it’s the only one.

The four due dates

If a due date falls on a weekend or public holiday, the payment is on time if received on the next business day.

Three ways to calculate individual instalments

The key protection: if you pay exactly what the CRA’s reminder asks, on time, the CRA won’t charge instalment interest — even if your final tax bill turns out higher. You’ll still owe the balance by 30 April, but without instalment interest.

What does it cost if you don’t pay?

Instalment interest

The CRA charges interest on late or insufficient instalments at the prescribed rate, which is 7% a year, compounded daily, for October to December 2026. It’s calculated from each missed due date until the earlier of the date you pay or the balance-due date.

Instalment penalty

If your instalment interest for the year is more than $1,000, a penalty may also apply: generally, 50% of the amount by which your instalment interest exceeds the greater of $1,000 and 25% of the instalment interest you’d have owed if you’d made no payments at all.

The good news: you can “catch up”

The CRA uses a contra-interest approach: paying early, or paying more than required on a later date, earns a credit that offsets interest charged on earlier late payments. So if you skipped March and June, paying a larger amount before 15 December — or even earlier — reduces the damage. You can’t earn a net refund of interest, but you can offset charges to zero.

Example: A self-employed designer owes $16,000 for 2026 and was supposed to pay $4,000 each quarter. She paid nothing in March, June or September. By paying $16,000 in early October, well ahead of 15 December, she earns contra-interest for paying the December portion more than two months early. That offsets part of the interest on the missed payments — and stops the interest clock on them immediately.

Corporations: monthly or quarterly instalments

A corporation must pay instalments if its total tax payable (federal and provincial) is more than $3,000 in the current or previous tax year.

Monthly (the default)

Most corporations pay 12 monthly instalments, due on the last day of each month of the tax year. Options for the amount:

• One-twelfth of the estimated tax for the current year.
• One-twelfth of the tax for the previous year.
• For the first two months, one-twelfth of the tax from two years ago; then the remaining ten instalments make up last year’s total.

Quarterly (small CCPCs)

A small Canadian-controlled private corporation may pay quarterly instead, on the last day of each quarter of the tax year, if it:

• had taxable income (with associated corporations) of $500,000 or less in the current or previous year;
• had taxable capital employed in Canada (with associated corporations) of $10 million or less;
• claimed the small business deduction; and
• has a perfect compliance history over the previous 12 months (filed and paid on time).

Balance due dates

Corporate instalments are separate from the balance due date. Any remaining tax is due two months after year-end, or three months for CCPCs that claimed the small business deduction and whose taxable income (with associated corporations) was $500,000 or less in the previous year. The T2 return is due six months after year-end — but interest starts on the balance due date, not the filing date.

GST/HST instalments

If you file GST/HST annually and your net tax for the year is $3,000 or more, you must make quarterly GST/HST instalments, due one month after the end of each fiscal quarter. If you’re a monthly or quarterly filer, you don’t make separate instalments — your returns serve that purpose. Interest applies to late GST/HST instalments too. See our Ontario HST guide.

How to pay

• Online banking: add “CRA (revenue) – tax instalment” as a payee for individuals, or the corporate instalment payee for businesses, using the correct account number. Choosing the wrong payee is a common cause of misapplied payments.
• My Payment on the CRA website (Interac debit or Visa/Mastercard debit).
• Pre-authorized debit through My Account or My Business Account — set it and forget it.
• Third-party providers for credit card payments (they charge fees).
• At a Canada Post counter with a QR code.

Payments must be received by the due date. Online banking transfers can take a few business days.

Practical tips for business owners

• Set aside tax from every payment. Many self-employed people open a separate savings account and move 25–30% of each payment into it.
• Use pre-authorized debits for corporate monthly instalments.
• Review mid-year. If income has fallen sharply, switching to the current-year option may free up cash — but only with a reliable forecast.
• Coordinate owner pay. If you pay yourself dividends from your corporation, you’ll likely owe personal instalments. A small salary with withholding can reduce or eliminate them.
• Check your CRA account balance before 15 December, and make a catch-up payment if needed.
• Don’t overpay blindly. The CRA pays corporations only 3% interest on overpayments in late 2026, while charging 7% on underpayments, so precision has value.

Frequently asked questions

Stop paying the CRA interest

Solstice Partners calculates personal and corporate instalments, sets up pre-authorized payments and plans owner pay so you’re never surprised in April. See our personal tax services or book a consultation.

Sources

• Canada Revenue Agency — Paying your income tax by instalments
• Canada Revenue Agency — Corporation instalments
• Canada Revenue Agency — Prescribed interest rates
• Canada Revenue Agency — GST/HST instalments

This article is general information, not tax advice for your situation. Thresholds, rates and due dates can change; confirm the details before acting.