Tax Installments Canada: The Self-Employed Guide to Quarterly Payments
Your first year freelancing, you wrote one cheque in April and moved on. Your second year, CRA expects you to pre-pay taxes in four quarterly chunks while still settling last year's balance. This guide explains exactly when installments apply, how to calculate them, and how much to set aside — so the “double payment year” never blindsides you.
Quick Answer
You must pay quarterly tax instalments if your net tax owing exceeds $3,000 in the current year AND exceeded $3,000 in at least one of the two prior years ($1,800 threshold in Quebec). The four deadlines are March 15, June 15, September 15, and December 15. Missing them triggers daily compound interest plus a penalty equal to 50% of the interest charged on any shortfall.
The Installment Trap: Why Your Second Year Hits Harder
In year two, if you owed more than $3,000 last year, CRA now expects you to pre-pay this year's taxes in four quarterly chunkswhile still paying off last year's balance. Welcome to the “double payment year.”
When you're self-employed, you become your own payroll department. The problem is nobody explains this when you get your first freelance client.
Do You Have to Pay Installments? The CRA Trigger Rules
The requirement kicks in when both of the following are true:
- Your net tax owing exceeds $3,000 in the current year
- Your net tax owing also exceeded $3,000 in at least one of the two prior tax years
Quebec: The trigger is $1,800, and you pay installments to both CRA (federal) and Revenu Québec (provincial) separately.
The Three Ways to Calculate Your Payments
Method 1: No-Calculation (Safe Harbour)
Pay exactly the amounts on your CRA installment reminders (mailed in February and August) and you're fully protected from installment interest — even if your actual owing turns out to be higher at filing.
Best for: Anyone who wants simplicity and has relatively stable income.
Method 2: Prior-Year Method
Take last year's total net tax, divide by four, pay that amount each quarter. If you owed $16,000 last year, each installment is $4,000. Also protects from installment interest.
Best for: Freelancers with a completed prior year return and stable income.
Method 3: Current-Year Estimate
Estimate this year's tax ÷ 4. Most accurate when income has changed significantly. Risk: If you underestimate, CRA charges interest from the original due date of each missed installment — paying double in December does not cancel March interest.
Best for: Freelancers whose income has changed substantially from prior years.
The Four Deadlines You Cannot Miss
| Quarter | Due Date |
|---|---|
| Q1 | March 15 |
| Q2 | June 15 |
| Q3 | September 15 |
| Q4 | December 15 |
Pay through CRA My Account or your bank (payee: “CRA (revenue) — income tax installments”). Do not use the “balance owing” payee code — it posts to your tax return, not your installments.
Worked Example: $75,000 Net Income in Ontario
| Tax Component | Amount |
|---|---|
| Federal income tax | ~$10,200 |
| Ontario provincial income tax | ~$5,400 |
| CPP contributions | $8,068 (max) |
| Total tax + CPP | ~$23,668 |
CPP ($8,068) is paid at filing. Remaining ~$15,600 in income tax = ~$3,900/quarter in installments. Total quarterly reserve needed: ~$5,500–$6,000 (income tax + CPP set-aside).
How Much to Set Aside by Province
| Province | Net Income | Suggested Set-Aside |
|---|---|---|
| Ontario | Under $60,000 | 25–28% |
| Ontario | $60,000–$100,000 | 30–35% |
| Ontario | Over $100,000 | 35–40% |
| British Columbia | $60,000–$100,000 | 28–33% |
| Alberta | $60,000–$100,000 | 27–32% |
| Quebec | $60,000–$100,000 | 35–40% |
These percentages include income tax and CPP. They do not include GST/HST you collect — that money was never yours to keep.
GST/HST Installments: The Separate System Nobody Warns You About
Income tax installments and GST/HST installments are completely separate systems with different triggers, deadlines, and remittance addresses. GST/HST installments apply when you are an annual filer and net GST/HST owing exceeds $3,000. Due dates: April 30, July 31, October 31, January 31.
The money you collect as GST/HST from clients was never your income — keep it in a separate account and remit on schedule.
Frequently Asked Questions
What happens if I miss a CRA tax installment deadline?
CRA charges interest from the original due date, compounded daily at the prescribed rate (currently 10%/year). Pay as soon as you notice — interest stops accruing from that point.
Can I skip installments if I know I'll get a refund this year?
If your income has dropped and you expect to owe under $3,000, technically yes. But if you're wrong, interest accrues from each missed due date. When uncertain, pay safe-harbour amounts.
Do tax installments count as a business deduction?
No. They reduce your balance owing at filing but are not deductible expenses.
I'm in Quebec — do I pay installments twice?
Yes. Separate payments to CRA (federal) and Revenu Québec (provincial). Quebec threshold is $1,800 vs. $3,000 federally. Same deadlines, different accounts.
NorthOS calculates your Safe to Spend number automatically
What's genuinely yours after GST/HST, income tax reserves, and CPP are set aside — updated every time you log income.
Disclaimer: This article is for informational purposes only and does not constitute tax advice. CRA rules can change — always verify with the CRA or a qualified tax professional.