If you’re self-employed, earn rental or investment income, or have minimal tax withheld from your earnings, the Canada Revenue Agency (CRA) may require you to make tax installment payments throughout 2025. Failing to understand how these work can lead to unexpected interest charges — but the good news is, they’re easy to manage once you know the rules.
Understanding CRA’s Installment Calculation Methods
The CRA lets you calculate your installment payments in three different ways. This flexibility helps you manage your quarterly tax obligations better.
Method 1: No-Calculation Option
The no-calculation option lets you pay the exact amounts shown in the CRA's installment reminders. You'll receive these notices in February and August. They split your estimated tax into four equal payments. This straightforward approach means the CRA handles all calculations based on your previous tax records.
Method 2: Prior-Year Option
Your second choice bases payments on your previous year's tax situation. You'll need to take the total tax you owed last year and split it into four equal payments. This method works best if your income stays about the same year after year.
Method 3: Current-Year Option
People who see big changes in their income might prefer the current-year option. You can estimate your tax owing for this year and adjust your payments. Each installment date requires one-quarter of your estimated current-year taxes.
Your specific financial situation should guide your choice between these methods. The no-calculation option keeps things simple but might not suit fluctuating income. The prior-year option gives you certainty yet could lead to overpayment if your income drops. The current-year option helps minimize payments during income downturns but needs careful estimation.
The CRA gives you complete freedom to pick any method that results in the lowest payments. You can even switch methods throughout the year as your situation changes.
Interest charges apply to any underpaid amounts quickly. Making accurate estimates while keeping your quarterly payments as low as possible is vital during the tax filing process.
What Are Tax Instalment Payments?
Tax installments are periodic payments made to the Canada Revenue Agency (CRA) to cover the income tax you would normally owe at the end of the year. They’re typically required when your income isn’t subject to tax withholding — like employment income usually is.
Who Has to Pay Instalments?
You may need to pay installments in 2025 if the following applies:
- You owed more than $3,000 in tax ($1,800 in Quebec) in either 2023 or 2024, and
- Your net tax owing in 2025 is expected to be above that threshold again.
Common situations include:
- Self-employed individuals
- Landlords
- Investors
- Retirees receiving RRIF income with insufficient tax withheld
When Are 2025 Instalments Due?
Tax installments in Canada are typically paid quarterly:
- March 15, 2025
- June 15, 2025
- September 15, 2025
- December 15, 2025
If the due date falls on a weekend or holiday, the payment is due the next business day.
How Do I Know If I Have to Pay Tax by Instalments?
The CRA will look at your prior-year tax return and send installment reminders to you based on your prior returns. Although payments are typically due quarterly, the CRA will only send two installment reminders:
- February reminder is for the March and June payments
- August reminder is for the September and December payments
You can find the amount you owe and the reminders online in your CRA My Account for Individuals or your CRA My Business Account.
Please note, that if you’ve opted to receive an express Notice of Assessment (NOA), installment reminders will also be electronically sent (i.e., not physically mailed).
How Much Should You Pay?
You have three options:
1. No-calculation option
Use the amounts suggested in the installment reminders the CRA mails to you in February and August. This is the simplest way to avoid installment interest — even if your income is lower this year.
2. Prior-year option
Base your 2025 payments on your 2024 tax owed. Divide that by four.
3. Current-year option
Estimate your 2025 tax owing and divide by four. This is useful if you know your income will drop and you want to avoid overpaying.
Warning: If you underpay and owe more than $1,000 when you file, the CRA may charge installment interest and possibly a penalty.
What if my income level changes in the same year as I make installment payments?
As stated above, tax installments can be calculated using several different methods, including prior year amounts owed, most recent year, and/or an estimated current year amount.
If your income increases through the year, you may owe additional income tax when you go to file your return – even though you’ve already made installment payments. If that’s the case, you are still obligated to pay the outstanding amount by April 30 of the following year.
If your business is cyclical and your income fluctuates greatly throughout the year, you may still be required to pay your installments. If that’s the case, then it’s important to treat installments as any other financial obligation – budget accordingly to pay the right amount at the right time.
How to Make Instalment Payments
You can pay your installments through:
- CRA My Payment (online banking)
- Pre-authorized debit (PAD)
- Your financial institution
- Mailing a cheque with an installment remittance slip
Make sure to keep your receipts or confirmations — the CRA doesn’t always issue formal receipts for each installment.
Corporate and Self-Employed Installment Rules
Tax filing rules are different for corporate and self-employed taxpayers compared to individual tax obligations.
A corporation must pay income tax monthly, but eligible small Canadian-controlled private corporations (CCPCs) can choose quarterly payments. The CCPC needs these qualifications for quarterly installments:
- A perfect compliance history for the previous 12 months
- Taxable income of $696,680.10 or less
- Taxable capital in Canada of $13.93 million or less
A corporation's first installment payment is due one month (or one quarter for eligible CCPCs) less a day from when the tax year begins. So, corporations with calendar tax years that make monthly payments must pay on each month's last day.
The CRA lets corporations calculate installments in three ways: they can estimate current year taxes, use last year's taxes, or combine the previous two years' approach. The CRA will pick the option that results in the lowest amount payable in installments.
New corporations don't need to make installment payments in their first year after incorporation. The only exception applies to tax on carved-out income, which needs installments even in year one.
Self-employed taxpayers need to pay installments on March 15, June 15, September 15, and December 15. Farmers and fishers with this as their primary income only need to make one payment by December 31.
You must make installments if your net tax owing is more than $4,180.08 ($2,508.05 in Quebec). This same rule applies to corporations - they don't need installments if their tax payable stays at $4,180.08 or less for the current or previous year.
A corporation's balance-due day falls two months after its tax year ends. This extends to three months for eligible CCPCs that meet specific small business deduction conditions.
Can I Reduce or Eliminate Tax Instalment Payments?
There are two ways to reduce or eliminate your tax installment payments:
1. You incur losses or generate little income in a given tax year
If you incur rental losses, capital losses, or otherwise have no taxable income within a given tax year, you likely do not need remit installments because you will not owe any taxes.
2. You are employed or receive pensions
If you’re an employee or receive certain pension payments, you can have tax withheld or increase the amount of tax deducted from these sources:
- Old Age Security
- Canada Pension Plan Benefits
- Employment Insurance or pension benefits
What Happens If You Don’t Pay?
If you miss or underpay installments, the CRA will charge you installment interest at the prescribed rate (currently 10% per year, compounded daily). There may also be a penalty if your installments are substantially lower than required.
Final Thoughts
Installment payments aren’t just for the ultra-wealthy — many Canadians with non-traditional income sources need to pay them. If you expect to owe more than $3,000 in 2025 and no tax is withheld at source, get ahead of it. Use the CRA’s reminders or estimate your payments early in the year. A bit of planning can save you hundreds in interest and stress come tax time.
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Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.