Quarterly Tax Instalments — Do You Need to Pay CRA in Advance?

The $3,000 threshold

The CRA requires instalment payments once your net tax owing exceeds $3,000 in the current year and in one of the two preceding years ($1,800 if you're a Quebec resident, since provincial tax there is collected separately). If you're self-employed with no tax withheld at source, your entire tax bill counts toward this threshold — there's no employer withholding to offset it, unlike a salaried employee. See our self-employment tax basics guide for how that tax bill is calculated in the first place.

Due dates

Instalments are due four times a year:

• March 15
• June 15
• September 15
• December 15

The CRA sends instalment reminders to people who qualify, but receiving (or not receiving) a reminder doesn't change the legal obligation — if you cross the threshold, you owe instalments whether or not CRA reminds you.

Three ways to calculate what you owe

You get to choose which of three methods to base your instalments on, and picking the right one for your situation can meaningfully reduce interest exposure:

• No-calculation option: pay exactly what the CRA calculates from your latest assessed return, shown right on your instalment reminders. Best if your income is roughly steady year to year — if it is, this option alone shields you from instalment interest even if your actual final tax bill differs somewhat.
• Prior-year option: base instalments on last year's tax return. Best if this year will resemble last year but not the year before that.
• Current-year option: base instalments on your own estimate of this year's income. Best if this year is meaningfully different from the last two — but if you underestimate, you're exposed to instalment interest on the shortfall, so this option carries the most risk if your estimate turns out too low.

What happens if you miss one

CRA charges instalment interest on late or insufficient payments, at the prescribed rate plus 2%, compounding daily. A separate penalty may also apply, but only if that instalment interest works out to more than $1,000 for the year. This can add up quickly on a large balance, so it's worth estimating your instalments proactively rather than waiting for a shortfall to surface at filing time.

Since your instalment amounts are based on your expected tax owing, running your numbers through a tax estimator as your income changes through the year makes it much easier to set aside the right amount before each due date, instead of guessing.

A practical approach for fluctuating freelance income

If your income varies quarter to quarter (common for freelancers with lumpy project work), re-estimating your tax owing each quarter using the current-year option — rather than committing to one number in January — lets you adjust each instalment as the year unfolds instead of over- or under-paying based on a January guess. The trade-off is that current-year estimates carry the interest risk described above if you consistently underestimate, so err on the side of a slightly higher estimate if your income is trending upward.

Common mistakes to avoid

• Assuming no reminder means no obligation. The threshold, not the CRA's reminder letter, determines whether you owe instalments.
• Picking the current-year option and then underestimating. If you're not confident in your estimate, the no-calculation or prior-year options carry less interest risk.
• Forgetting Quebec's lower $1,800 threshold and assuming the general $3,000 figure applies everywhere.
• Paying the full year's tax as one lump sum in April after already triggering the instalment requirement — this doesn't avoid the instalment interest already accrued on missed quarterly amounts.

Frequently asked questions

Does this apply to my first year of self-employment? Only if your net tax owing in that year, combined with a look-back at the two prior years, meets the threshold — most people transitioning into self-employment mid-career have prior T4 years with little or no balance owing, so instalments often start in a later year once self-employment income has been earned for a full prior year.

Can I pay more than my calculated instalment to get ahead? Yes — overpaying an instalment isn't a problem, and the CRA pays instalment interest back to you on amounts paid before they're due, though generally at a lower rate than what they'd charge you for being late.

Do instalments apply to GST/HST too, separately from income tax? Yes, GST/HST has its own, separate instalment regime for some filers — this guide covers income tax instalments only.

Official source: CRA – Required tax instalments