How to Calculate Quarterly Tax Instalments in Canada (2026)

Bottom line: CRA requires quarterly tax instalments if you owe more than $3,000 in net tax for the current or either of the two prior years — due dates are March 15, June 15, September 15, and December 15, with interest charged on late or insufficient payments.

If you're self-employed, have rental income, or significant investment income, CRA may require you to pay tax quarterly instead of waiting until April. Missing or underpaying instalments triggers interest and potentially penalties. Here is everything you need to know to calculate, pay, and optimize your quarterly tax instalments for 2026.

1Who Needs to Pay Instalments?

You must pay quarterly instalments if your net tax owing exceeds $3,000 in the current year AND in either of the two previous years. For Quebec residents, the federal threshold is $1,800 of net federal tax owing (because Quebec collects its own provincial tax). Revenu Québec has its own separate threshold of $1,800 of Quebec tax.

"Net tax owing" means your total tax minus amounts withheld at source (T4 employment withholdings, for example). This is the amount on line 43700 of your T1 return minus line 43500.

Common Situations

How CRA Notifies You

CRA sends instalment reminder notices (called INNS) about a month before each due date. You will receive them by mail or in your My CRA Account. The notice will include suggested payment amounts based on your prior returns.

However, you do not need to wait for a notice. If you know you will owe more than $3,000, you should calculate and pay instalments proactively.

2Instalment Due Dates

Today only the December 15, 2026 instalment is left this year. Instalments for 2027 follow the same four dates.

When a due date falls on a weekend or holiday, your payment is due the next business day. All the dates above fall on weekdays, so no extension applies.

Mark these in your calendar. Late payments attract interest at the prescribed rate (7% annually for October-December 2026, updated quarterly by CRA), compounded daily.

3Three Ways to Calculate Instalments

CRA accepts three methods. You can use whichever results in the lowest amount without triggering interest charges.

Method 1: Prior Year (No-Change Method)

Divide last year's total tax by 4. Pay that amount each quarter.

Best if: Your income is stable year to year.

Example: 2025 total tax was $24,000.

Quarterly instalment: $24,000 / 4 = $6,000

This is the simplest method and the one most accountants recommend for consistent earners.

Method 2: Current Year Estimate

Estimate your 2026 tax and divide by 4.

Best if: Your income dropped this year (paying less) or you want to pay the minimum amount.

Example: You expect 2026 tax of $18,000.

Quarterly instalment: $18,000 / 4 = $4,500

Warning: If you underestimate and end up owing significantly more, CRA will charge instalment interest on the shortfall. Use conservative estimates.

Method 3: CRA's Suggestion (Prior-Prior Year Method)

CRA sends you an instalment reminder notice (INNS) with specific amounts. The first two quarters are based on two years ago; the last two adjust based on last year.

Best if: Your income fluctuates and you don't want to calculate manually.

Example with rising income:

• Q1 and Q2: $18,000 / 4 = $4,500 each
• Q3 and Q4: ($24,000 - $9,000) / 2 = $7,500 each
• Total: $24,000

This method front-loads less and adjusts upward in the second half of the year, which can help with cash flow.

Which Method Saves You the Most?

CRA calculates instalment interest using all three methods and charges you only on the difference between what you paid and the lowest amount that would have been required under any of the three methods. This gives you built-in flexibility.

4What Happens If You Pay Late?

CRA charges instalment interest at the prescribed rate on the shortfall from each due date. The interest compounds daily.

However, CRA will offset instalment interest if your total instalments for the year equal or exceed the required amount by one of the three methods above. You have some flexibility in timing.

How Instalment Interest Is Calculated

CRA calculates instalment interest for each quarter separately:

1. Determine the required instalment amount (using the method that produces the lowest total interest)
2. Compare what you actually paid on or before the due date
3. Charge interest on any shortfall from the due date to April 30 of the following year (or the date you pay the balance, if earlier)

Example: Your Q4 instalment was $5,000, but you only paid $3,000 on December 15, 2026. CRA charges interest on the $2,000 shortfall at the prescribed rate (7% for Q4 2026) from December 15, 2026 to April 30, 2027 (or until paid).

$2,000 x 7% x (136 days / 365) = approximately $52 in interest (simple interest; CRA compounds daily, so the real figure is slightly higher)

Instalment Penalty

If your instalment interest exceeds $1,000, CRA charges an additional penalty equal to 50% of the interest that exceeds the greater of $1,000 or 25% of your instalment interest (if you had paid the minimum amount).

In practice: Pay on time. The penalty math is complex and always works against you. On a large tax bill with no instalments paid, interest and penalty add up quickly.

5Setting Aside Money: The 25-30% Rule

The simplest approach for self-employed Canadians:

1. Open a dedicated high-interest savings account (call it "Tax Account")
2. Every time you receive payment, transfer 25-30% to the tax account
3. Pay instalments from this account on due dates
4. Any excess after filing goes back to your main account

What Percentage to Set Aside?

Remember: Self-employed CPP is double the employee rate (11.90% on first $74,600 minus the $3,500 exemption, plus 8% on earnings between $74,600 and $85,000). This is on top of income tax. The maximum self-employed CPP/CPP2 contribution in 2026 is $9,293.

Where to Park the Money

Since you are holding this money for 3-12 months before paying CRA, keep it somewhere accessible but earning interest:

• High-interest savings account (HISA): Many Canadian online banks pay interest on balances
• GIC ladder: Buy 90-day GICs maturing before each instalment date
• Money market fund: Slightly higher yield, same-day redemption

Even at 4% on $25,000 held for 6 months, you would earn $500 in interest. That is money CRA would otherwise have.

6Your First Year of Self-Employment

Good news: In your first year, CRA doesn't know your income yet, so they don't send instalment reminders. You won't owe instalment interest.

Bad news: You'll owe a large lump sum at tax time (April 30). Many new freelancers are surprised by the size of the bill.

Strategy: Start setting aside 25-30% from day one, even though CRA doesn't require it yet. When you file your first return and CRA sees your income, they'll start requiring instalments the following year.

First-Year Worked Example

You start freelancing in January 2026 and earn $90,000 net for the year (Ontario):

If you set aside 30% monthly: $90,000 x 30% = $27,000 saved. That covers the bill with about $1,600 to spare.

If you set aside nothing: a $25,373 surprise bill is devastating. This is the number one reason new freelancers fail financially.

7Mixed Income: Employment + Self-Employment

If you have a day job and freelance on the side, your employer's withholdings may cover most of your tax. You only need instalments if the net amount owing (total tax minus withholdings) exceeds $3,000.

Example: Your T4 job withholds $15,000 in tax. Your total tax including freelance income is $22,000. Net owing: $7,000. You need instalments of $1,750/quarter.

Adjusting Employer Withholdings Instead

If your side income is relatively small, you can ask your employer to withhold extra tax from each paycheque by filing a TD1 form with additional tax deductions. This eliminates the need for quarterly instalments entirely.

Example: $7,000 net owing / 26 pay periods = $269 extra per paycheque. Ask your employer to withhold an additional $270 per pay.

This approach is simpler and avoids the risk of missing instalment deadlines.

8Instalments for Rental Income

If you own rental property, the net rental income is added to your other income and taxed at your marginal rate. Common instalment scenarios:

For rental income, you can deduct expenses (mortgage interest, property tax, insurance, repairs, CCA) before calculating your instalment amount. Use your expected net rental income, not gross rent.

9Provincial Instalments

• Most provinces: Federal and provincial instalments are combined. One payment to CRA covers both. CRA splits the payment between federal and provincial portions automatically.

• Quebec: You must pay separate provincial instalments to Revenu Quebec. Same due dates, separate calculation. Use Revenu Quebec's online portal or mail payments with the appropriate remittance form. The federal threshold for Quebec residents is $1,800 of net federal tax owing (CRA: "$3,000 (for Quebec $1,800)"), and Revenu Québec applies its own $1,800 threshold to Quebec tax.

Quebec example:

• Federal net tax owing: $10,000 -- pay $2,500 quarterly to CRA
• Quebec provincial tax owing: $8,000 -- pay $2,000 quarterly to Revenu Quebec
• Total quarterly payment: $4,500 (but to two different agencies)

10Using the Instalment Calculation for RRSP Planning

Smart move: If your quarterly instalment amount seems high, consider making an RRSP contribution before the instalment is due. The RRSP deduction reduces your estimated tax, which reduces your required instalment under Method 2.

Example: Your estimated 2026 tax is $30,000. You make a $10,000 RRSP contribution, reducing taxable income and estimated tax to $27,000. Your quarterly instalment drops from $7,500 to $6,750 — saving $3,000 in cash flow spread across the year.

Just make sure you actually have the RRSP room available.

11Making Instalment Payments

Payment Methods

Recommended approach: Set up pre-authorized debit through My CRA Account. You choose the amount and dates, and CRA withdraws automatically. This eliminates the risk of forgetting a payment.

Tracking Your Payments

Keep records of every instalment payment:

• Date paid
• Amount
• Method
• Confirmation number

CRA sometimes takes 3-5 business days to credit payments. If you pay on the due date via online banking, the payment may not show up until after the deadline. Pay 2-3 days early to be safe.

12Record-Keeping for Instalments

Keep the following records for at least 6 years:

• Payment confirmations: Bank receipts, CRA My Account payment history
• Income estimates: The calculation you used to determine instalment amounts
• CRA instalment reminders: The suggested amount letters from CRA
• Correspondence: Any CRA notices about instalments or interest charges

If CRA assesses instalment interest, you may be able to dispute it by showing you used an acceptable calculation method. Having your records organized makes this straightforward.

13Advanced Strategies

Quarterly Re-Estimation

If your income is seasonal or variable, you can recalculate your instalment amount each quarter using Method 2. Pay less in low-income quarters and more in high-income quarters.

Example for a landscaper:

• Q1 (winter — low revenue): Pay $2,000
• Q2 (spring — high revenue): Pay $8,000
• Q3 (summer — peak revenue): Pay $10,000
• Q4 (fall — declining): Pay $4,000
• Total: $24,000

As long as your total payments meet the requirements under one of the three methods, CRA will not charge interest.

Coordinating with Corporate Instalments

If you operate a corporation, the corporation has its own instalment requirements (monthly, not quarterly). Personal instalments cover only personal tax on salary, dividends, and other personal income. Do not double-count.

14Instalments for Corporations (CCPC)

If you have incorporated, corporate instalment rules differ significantly:

Some qualifying small CCPCs may pay quarterly on the last day of each quarter instead of monthly. Ask your accountant whether yours qualifies. Most established CCPCs pay monthly.

15Frequently Asked Questions

Can I make one annual payment instead of quarterly?

You can, but you'll owe instalment interest from each quarter's due date. CRA doesn't care that you eventually paid the full amount — they care about when you paid it.

What if I overestimate and pay too much?

CRA refunds the excess when you file your return. You'll also earn a small amount of instalment credit that offsets future interest charges.

Do I need to file a special form for instalments?

No. You just send the payment to CRA by the due date. You can pay through:

• My CRA Account (online banking)
• Pre-authorized debit
• At your bank using the remittance voucher
• By cheque (not recommended — slow)

What if my income is seasonal?

You can use Method 2 (current year estimate) and adjust your quarterly amounts based on when you actually earn the income. For example, if you're a landscaper earning 80% in Q2-Q3, you might pay smaller amounts in Q1 and Q4.

Are provincial taxes included in the instalment amount?

Yes. Your instalment covers both federal and provincial tax (except Quebec, where you make separate instalments to CRA and Revenu Quebec).

What if I just started self-employment and have no prior year data?

You will not owe instalment interest in your first year. But you will owe a lump sum on April 30 of the following year. Start setting money aside immediately.

Can I change my instalment amount mid-year?

Yes. There is no commitment. If your income changes significantly, recalculate using Method 2 and adjust your remaining payments accordingly. You do not need to notify CRA of the change.

What happens if I go back to full-time employment?

If your employer's withholdings cover your total tax for the year, you will not need to make instalments the following year. CRA checks the $3,000 threshold annually.

Are GST/HST instalments different from income tax instalments?

Yes. If you are registered for GST/HST, you may also have GST/HST instalment obligations. These are separate payments with separate due dates (quarterly or annual, depending on your reporting period). GST/HST instalments are calculated based on your prior year's net GST/HST.

All rates and thresholds are for the 2026 tax year. This guide is for planning purposes — consult a tax professional for advice specific to your situation.

16Sources

• CRA — Income Tax Instalments (opens in a new tab)
• CRA — Prescribed Interest Rates (opens in a new tab)
• CRA — Sole Proprietorships and Partnerships (opens in a new tab)
• CRA — Payroll Deductions Formulas (T4127) (opens in a new tab)
• CRA — Making Payments to the CRA (opens in a new tab)