Once you owe the CRA more than $3,000 of net tax in a year (more than $1,800 if you live in Quebec), and you also owed more than that in one of the two prior years, the CRA requires you to pay your tax in quarterly instalments rather than in one lump at the end. For a self-employed tradesperson with no tax taken off at source, this usually kicks in after the first solid year of profit. The instalments are due March 15, June 15, September 15 and December 15, and they cover your income tax and your CPP together. Miss them or underpay and the CRA charges instalment interest, and possibly a penalty on top.
When you have to pay by instalments
Two conditions both have to be met:
- Your net tax owing this year will be more than $3,000 (more than $1,800 for Quebec residents), and
- Your net tax owing was more than that same threshold in either of the two previous years.
Net tax owing here means the tax left after credits and any tax already withheld. A salaried worker rarely triggers it because their employer withholds tax all year. A sole proprietor, with nothing withheld, almost always triggers it once the business turns a steady profit, which is why so many tradespeople meet their first instalment requirement in their second profitable year.
The 2026 due dates
Individual instalments are due quarterly:
- First: March 15 (in 2026 this lands on March 16, because March 15 is a Sunday and the deadline moves to the next business day)
- Second: June 15
- Third: September 15
- Fourth: December 15
Your final balance, if the instalments did not cover everything, is still due by April 30 of the following year, separate from the instalments. (Self-employed people get until June 15 to file the return itself, but interest on any balance still runs from May 1.)
The three ways the CRA lets you calculate them
Once you are an instalment payer, you can choose any of three methods, and you can pick whichever gives the lowest correct payment:
- No-calculation method. Pay exactly the amounts on the instalment reminder the CRA mails or posts to My Account. The CRA bases the first two payments on your tax from two years ago and the last two on last year's. If you pay these amounts on time, you are protected from instalment interest even if you end up owing more. This is the safe default, especially in your first instalment year.
- Prior-year method. Pay one quarter of last year's net tax owing in each of the four instalments. Good when your income is roughly flat year to year.
- Current-year method. Estimate this year's tax and pay it in four equal instalments. Best when you know this year will be lower than last, but it relies on your estimate being right; guess too low and interest applies.
Whichever method you use, the instalments are meant to include your CPP as well as income tax, and any voluntary EI premiums. Forgetting CPP is the most common reason a tradesperson's instalments fall short.
Worked example
A plumber's net tax owing (income tax plus CPP) was $9,000 last year and is expected to be similar this year. Under the prior-year method they pay $2,250 each quarter, on March 16, June 15, September 15 and December 15. If instead they expect a quieter year at, say, $6,000 of net tax, the current-year method lets them pay $1,500 a quarter, but only if that estimate holds up. The no-calculation amounts on the CRA reminder are the risk-free fallback.
What happens if you underpay
The CRA charges instalment interest at the prescribed rate plus 4 percent on payments that are late or short. For the first and second quarters of 2026 the prescribed rate is 3 percent, making the instalment interest rate 7 percent. The prescribed rate is reset every quarter, so check the current figure on canada.ca before relying on it. The interest compounds daily from the day each instalment was due.
If your instalment interest for the year is more than $1,000, the CRA can add a further penalty, broadly half of the amount by which your instalment interest exceeds the greater of $1,000 or 25 percent of the interest you would have paid had you made no instalments at all. The way to avoid all of this is simple: pay the no-calculation amounts on time.
Common mistakes
- Ignoring the reminder. A CRA instalment reminder is not optional advice. Paying the amounts on it on time is the one method that shields you from interest.
- Forgetting CPP. Instalments must cover CPP, not just income tax. Leaving CPP out is the classic shortfall (see CPP and CPP2 for the Self-Employed).
- Guessing low on the current-year method. Underestimating this year's income means underpaid instalments and interest. Use no-calculation if unsure.
- Confusing the instalment dates with the filing date. Instalments are quarterly; the balance is due April 30; the self-employed return is due June 15. They are three different deadlines.
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