Tax Instalment Payments for Self-Employed Canadians: How They Work
If you owe more than $3,000 in taxes, the CRA requires you to pay in quarterly instalments. Here's how to calculate the right amount and avoid interest charges.
Marcus Chen
Tax Specialist
Unlike employees whose tax is withheld at source, self-employed Canadians receive income with no tax deducted. The CRA's response is quarterly tax instalment payments — essentially paying next year's tax bill in advance, in four equal instalments. Failing to pay instalments on time triggers interest, even if you eventually pay the full amount owing.
When Instalments Are Required
The CRA requires quarterly instalment payments if your net tax owing (federal + provincial, after credits) exceeds $3,000 in either the current year OR either of the two preceding years. In Quebec, the threshold is $1,800. The due dates are: March 15, June 15, September 15, and December 15.
Three Ways to Calculate Your Instalments
- Prior-year method: pay one-quarter of your previous year's net tax owing each quarter — simplest, avoids interest if income stays similar
- Current-year method: estimate this year's taxes, pay one-quarter each quarter — risky if you underestimate
- No-calculation method: use the instalment amounts the CRA sends you in their instalment reminders — based on two years prior, not current income
If you have a strong quarter, pay more than your minimum instalment. The CRA calculates interest on the shortfall daily — overpaying early costs nothing, while underpaying costs you the prescribed rate (currently 9% annually) on the shortfall.