If you owed more than $3,000 in net tax this year or either of the two previous years, CRA expects you to pay quarterly instalments. Miss them, and you’ll owe interest, even if you pay everything by April 30.
Who Has to Pay Instalments
You’re required to make quarterly instalment payments if your net tax owing (federal and provincial combined, minus amounts withheld at source) exceeds $3,000 in:
- The current tax year, OR
- Either of the two previous tax years
For most self-employed people, this kicks in after your first or second year of freelancing. Your employer-income taxes are deducted at source, but your T2125 self-employment income has nothing withheld, so the balance owing adds up fast.
CRA will usually send you an instalment reminder (Form INNS3) telling you what they expect. But the obligation exists whether or not you get the reminder.
The Payment Schedule
CRA instalments are due four times a year:
| Payment | Due Date |
|---|---|
| Q1 | March 15 |
| Q2 | June 15 |
| Q3 | September 15 |
| Q4 | December 15 |
If a due date falls on a weekend or holiday, your payment is due the next business day.
Three Ways to Calculate Your Instalments
CRA offers three methods. You can pick whichever one you want. The goal is to avoid interest charges.
Method 1: No-calculation option Pay the amount CRA tells you on your instalment reminder. They base this on your prior-year tax situation. Simplest option, no math required.
Method 2: Prior-year method Divide your total tax owing from last year by four. Each quarterly payment is one-quarter of that amount. Works well if your income is stable year over year.
Method 3: Current-year method Estimate your current year’s tax owing and divide by four. This is the most accurate if your income has changed significantly, but requires you to forecast your annual income, which is hard for freelancers.
If you overestimate and overpay, you’ll get a refund when you file. If you underestimate, you’ll owe the difference plus potential interest.
Month-by-Month Planning
How to stay ahead of instalments throughout the year:
January–February: Review last year’s tax return. Calculate your expected instalment amount using one of the three methods. Set aside 25–30% of income in a separate savings account as it comes in.
March 1–15: First instalment due March 15. Pay it from your tax savings account.
April 30: Any remaining balance from last year’s tax return is due. This is separate from your instalments.
June 1–15: Second instalment due June 15. Also your self-employed filing deadline. File your return even if you can’t pay the full balance.
July–August: Mid-year check. Compare actual income to your estimate. If you’re earning more than expected, increase your remaining payments.
September 1–15: Third instalment due September 15.
October–November: Start your year-end tax prep. Gather receipts, reconcile records.
December 1–15: Final instalment due December 15. Adjust this payment up or down based on your actual year.
What Happens If You Miss a Payment
CRA charges instalment interest on late or insufficient payments. The rate is the prescribed interest rate (currently around 8–10%, updated quarterly) applied daily on the shortfall.
Instalment interest isn’t a penalty. It’s calculated as if you should have paid evenly throughout the year. If you paid nothing until December 15, you’d owe interest on the three missed quarters even if your final payment covers the full year.
The interest compounds daily starting from each missed due date until the balance is paid or applied against your refund.
How to Reduce or Eliminate Instalments
A few legitimate strategies:
- RRSP contributions reduce your net tax owing, which can bring you below the $3,000 threshold. Contributing in February (before the March deadline) is especially effective.
- Increase business expenses timing. If you need to buy equipment or software, doing it before year-end increases your deductions and reduces tax owing.
- Withhold more from employment income. If you have a day job, you can ask your employer to increase tax withholding using Form TD1. This offsets your self-employment tax and may eliminate the instalment requirement.
First Year of Self-Employment
If this is your first year earning self-employment income, you likely didn’t owe more than $3,000 in either of the past two years, so instalments aren’t required yet.
But don’t ignore it. If your first-year T2125 nets $60,000+, you’ll probably owe more than $3,000, and CRA will expect instalments starting the following year. Use year one to build the savings habit.
Track Your Income So You’re Never Surprised
Accountly tracks your self-employment income in real time, so you always know where you stand against the $3,000 threshold. No more guessing what you’ll owe. You can see it month by month.
FAQ
What happens if I don’t pay quarterly instalments at all? CRA will charge instalment interest on the unpaid amounts from each due date. If you owe a large balance when you file, you’ll also face late-payment interest on that. There’s no separate “penalty” for missing instalments, just interest.
Do I have to pay instalments if I also have a full-time job? It depends on your net tax owing after employment withholdings. If your employer withholds enough that your total net tax owing stays under $3,000, you’re exempt. Many people with a day job and side freelance income fall below the threshold.
Can I pay instalments monthly instead of quarterly? CRA requires quarterly payments, but you can certainly set aside money monthly. Some freelancers transfer 25–30% of each invoice payment into a tax savings account, then make the quarterly payment from that account.
What’s the instalment interest rate? CRA uses the prescribed interest rate, which is updated quarterly. As of early 2026, it’s approximately 8–10%. Check CRA’s website for the current rate. It’s tied to the Government of Canada treasury bill rate plus 2%.
Do GST/HST instalments work the same way? Similar concept, different thresholds and schedule. If your annual net GST/HST owing exceeds $3,000, you may need to make GST/HST instalments as well, on a quarterly basis matching your reporting period.
Can I reduce instalment interest by paying more earlier in the year? Yes. CRA calculates interest based on the difference between what you paid and what you should have paid at each due date. Front-loading your payments (paying more in March and June) reduces interest even if later payments are smaller.
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