Tax Installments in Canada: A Straightforward Guide for Small Business Owners
If you run a small business in Canada — whether you’re incorporated or a sole proprietor — you’ve probably heard about tax installments, or maybe even opened a letter from the CRA asking for them and thought, “Wait, what is this and why do I owe it?”
You’re not alone — tax installments are one of those areas that can feel confusing and overwhelming if no one’s ever explained them properly. That’s exactly why we put this guide together.
We’ll walk you through what tax installments are, who needs to pay them, how they’re calculated, and what happens if you miss a payment. We’ll cover corporate tax installments, personal tax installments, and GST/HST installments, so you’ll know exactly what to expect — and how to stay ahead of it.
Understanding Tax Installments
What are Tax Installments, and when (and why) are they required?
Simply put — the CRA doesn’t like to wait until the end of the year to collect the taxes you owe. So, depending on your business’s tax situation, you may be required to pay your taxes in advance throughout the year in the form of installment payments.
Whether or not you need to make tax installment payments depends on how much tax you owed in the past. The CRA uses your previous tax bills to estimate what your future tax payable will likely be, and then requires you to make payments throughout the tax year to cover that amount in advance.
If you don’t keep up with these installment payments when required, the CRA will charge interest on the unpaid amounts — and those charges can add up quickly.
A heads-up if this is your first year having to make installment payments:
You might find yourself in a situation where you have both a tax balance owing from the previous year and new installment payments for the current year, all coming due around the same time.
It can feel a little like you’re paying twice — settling up for last year while prepaying for this year — so it’s important to be prepared for that cash flow hit. This is a common pain points for small business owners, and something we help our clients plan for regularly.
The good news? Once you understand how installments work, they’re manageable — and at Small-Books, we’re here to help you stay on track and avoid any surprises.
Corporate Income Tax Installments
Now that you know what tax installments are and why they’re required, let’s dive into how they work for different types of taxes, starting with corporate income tax installments.
If your business is incorporated, this section is for you!
Who Needs to Pay Corporate Tax Installments?
Generally, most profitable corporations need to pay in either monthly or quarterly installments. So let’s look at the exceptions:
You do not have to make instalment payments if your tax payable is $3,000 or less for either the current or previous year
The same threshold applies to provincial corporate tax in Ontario, Alberta, and Saskatchewan.
You do not have to make instalment payments for the first year after the date of incorporation.
For your first year, you have to pay any tax you owe on or before your balance-due date for that tax year. You may also need to start making instalment payments for your second tax year if you exceed the above threshold.
When Are Corporate Tax Installments Due?
Monthly payments are the default for most corporations — due on the last day of each month.
Quarterly payments are an option if your corporation:
Is a Canadian-Controlled Private Corporation (CCPC)
Claims the small business deduction
Had taxable income of $500,000 or less
Had taxable capital under $10 million
And has a perfect compliance history (meaning no late filings or missed remittances)
If eligible, quarterly installments are due:
March 31
June 30
September 30
December 31
How Much Do You Pay?
There are three ways to calculate your corporate tax installments:
CRA’s No-Calculation Option: Use the suggested amounts the CRA calculates based on your previous tax years.
If we’re filing your corporate taxes at Small-Books, we’ll also provide you with these recommended amounts in your tax filing package so you know exactly what to pay and when.Prior-Year Option: Divide last year’s total tax owing by your number of payments — either 12 monthly or 4 quarterly installments, depending on your filing schedule.
Current-Year Option: Estimate your current year’s tax payable and divide that amount across your payment schedule.
Caution: If your estimate is too low and you underpay, the CRA may charge interest on the shortfall.
Pro tip: Most of our clients stick with the CRA-suggested amount for simplicity and peace of mind — it’s the safest way to avoid interest or penalties, even if your final tax bill changes.
Important: Unlike personal tax installments, the CRA does not send out installment reminders for corporations. It’s up to you (or your bookkeeping team — that’s us!) to track those payment amounts and due dates.
Personal Tax Installments
Alright, moving on to personal tax installments.
These are most common for sole proprietors, self-employed folks, and people who earn income that doesn’t have tax withheld automatically - things like rental income, investment income, or dividends.
Who Needs to Pay Personal Tax Installments?
There are two factors to help determine if you have to pay tax instalments, where you live and how much you owe:
1. Province or territory where you live
The province or territory where you live on December 31 determines your net tax owing for tax instalments. Installments are required if you exceed the following threshold:
Quebec residents:
If your net tax owing is more than $1,800.
All residents (except Quebec):
If your net tax owing is more than $3,000.
2. Net tax owing
You have to pay your income tax by instalments for the current tax year if both apply:
Net tax owing in the current tax year
If your net tax owing is more than $3,000, or $1,800 for Quebec.
Net tax owing in either previous two tax years
If your net tax owing in either of the two previous tax years was also more than $3,000, or $1,800 for Quebec.
You can use the calculation chart for instalment payments for 2025 (PDF) to determine your estimated net tax owing and the total instalment amount you owe.
When Are Personal Tax Installments Due?
Personal installments are due:
March 15
June 15
September 15
December 15
If these dates land on a weekend or holiday, payments are due the next business day.
How Much Do You Pay?
You have three options:
No-Calculation Option: Follow CRA’s suggested amounts.
If we’re filing your personal taxes at Small-Books, we’ll also provide you with these recommended amounts (based on the CRA’s calculation method) in your tax filing package so you know exactly what to pay and when.This option is best if your income, deductions, and credits stay about the same from year to year.
This is the amount that will be indicated on the instalment reminders (see that topic next) that the CRA sends you.
Prior-Year Option: Divide last year’s tax by four.
Current-Year Option: Estimate this year’s tax, divide by four.
Again — if you make your installment payments in full by the due dates, the CRA will not charge instalment interest or a penalty, unless your estimated instalment amounts are too low compared to the CRA calculation (#1), and you do owe the CRA more money than you paid using your own chosen calculation amounts.
Receiving an instalment reminder
The Canada Revenue Agency (CRA) sends instalment reminders to people who will likely have to pay tax instalments. The reminders suggest the amount to pay and lists the calculation options.
There are two instalment reminders (form INNS1) sent:
February reminder is for the March and June payments
August reminder is for the September and December payments
You can view your instalment reminders online using My Account.
If you received an instalment reminder, but your net tax owing for the current tax year will be $3,000 or less ($1,800 or less for Quebec), you do not have to pay tax instalments.
If you received an instalment reminder and do exceed the threshold required to pay instalments, but you do not pay, you may have instalment interest and penalty charges.
GST/HST Installments
This next part applies to any business structure — whether you’re a sole proprietor or a corporation — as long as you’re registered for the GST/HST. However, it only applied to annual filers; so if you file monthly or quarterly, this doesn’t apply — you’re already paying throughout the year.
Who Needs to Pay GST/HST Installments?
You’ll need to pay GST/HST installments if:
You’re an annual GST/HST filer, and
Your net GST/HST owing was over $3,000 in your last fiscal year
Special rules for first time filers: Even if your net tax is less than $3,000 for your first fiscal year, you may have to make instalment payments in your second fiscal year.
This might be the case if you are an annual filer, and your first year as a GST/HST registrant was shorter than 12 months.
If so, divide your net tax for that reporting period by the number of days you were registered in that fiscal year. Multiply this amount by 365 (number of days). If the result is $3,000 or more, and your net tax for your second year will also be $3,000 or more, you will have to make instalment payments in your second year.
Pro tip: If your business is consistently growing, it might be a smart move to switch to quarterly GST/HST filing. That way, you’re remitting your GST/HST more frequently, keeping your cash flow steady, and avoiding large, lump-sum payments and the need for quarterly installments.
When Are GST/HST Installments Due?
Installments are due one month after each fiscal quarter-end.
Example for a business with a December 31 (calendar) year-end:
April 30
July 31
October 31
January 31
How Much to Pay?
1. Base your instalment payments on the previous year
These quarterly payments are usually equal to one-quarter (¼) of your net tax from the previous year.
Example: You are a business with a December 31 fiscal year-end. Your net tax for the 2020 fiscal year was $4,000.
The Canada Revenue Agency will calculate your quarterly instalments at $1,000 each ($4,000 ÷ 4).
Your first instalment is due April 30, 2021.
2. Base your instalment payments on the current year
You may also choose to base your quarterly instalment payments on an estimate of your net tax for the current year if you expect that it will be less than it was for the previous year.
However, if you estimate your instalments based on your current year and the instalment payments you make are less than the amount you actually should have paid, we will charge instalment interest on the difference.
Pro tip: To avoid potential underpayment, overpayment, or interest and penalties - we suggest switching to a quarterly GST/HST reporting frequency if you exceed the threshold. That way, you or your bookkeeper can determine exactly how much is owed for the period, and optimize your cashflow if your sales vary throughout the year!
How to Pay Tax Installments
For corporate, personal, and GST/HST installments, you can pay via:
Online banking: Add CRA as a payee, use your business number or SIN.
CRA My Business Account/My Account: Make one-time or recurring payments.
Pre-authorized debit (PAD): Set up one-time or recurring automatic payments through CRA My Account or My Business Account.
Mail: Send a cheque with your remittance voucher (less common now).
Important: Payments must be received by CRA on or before the due date to avoid interest.
What Happens If You Don’t Pay?
If you miss a payment or pay late and your balance owing for the year exceeds the installment threshold:
Interest charges apply immediately — calculated daily and compounded.
If the total interest exceeds $1,000 and you didn’t follow the CRA’s suggested installment amounts, a penalty may also apply.
However:
If your total tax owing for the year is below the installment threshold ($3,000 federally, $1,800 in Quebec), no interest or penalties will apply, even if you missed installment payments.
Similarly, if you chose to estimate your installments using your own calculation (rather than CRA’s suggested amounts) and your total year-end tax owing is fully covered by those payments, you won’t owe interest or penalties either.
Pro tip:
Even if your final tax bill turns out to be higher than what you prepaid through installments, as long as you made the required CRA installment payments based on their calculated amounts and by the due dates, you won’t be charged interest on the difference. The CRA only applies interest if you underpay the required installments or skip them altogether.
Summary
If your business owed more than $3,000 in tax in the past, or is expected to this year, installment payments will likely be required.
While it might seem tedious, staying on top of your installments:
✅ Avoids interest and penalties
✅ Keeps your cash flow predictable
✅ Prevents nasty surprises at year-end
Need help managing your tax installments?
Small-Books can track your payments, file your taxes, and manage your CRA compliance — so you can focus on running your business.
For a no-obligation consultation, click here and let’s get your tax plan sorted.
What is Small-Books?
The online bookkeeping service that gives you a dedicated bookkeeper supported by a team of knowledgeable small business experts. We’re here to take the guesswork out of running your own business—for good. Your bookkeeping team imports bank statements, categorizes transactions, and prepares financial statements for you every month. We even take care of the tax filing for you, from HST to income tax, so you can say goodbye to tax season stress!
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Small-Books assumes no liability for actions taken in reliance upon the information contained herein.
