Quarterly Tax Instalments: Self-Employed Canada Guide | Kountr

Self-employed Canadians must pay income tax quarterly — rather than in one April lump sum — once their net tax owing exceeds $3,000 in the current year and exceeded $3,000 in either of the two previous years. The four 2026 due dates are March 16, June 15, September 15, and December 15. Missing them triggers compound daily interest at the CRA's prescribed rate, currently 7% for the first half of 2026.

Why the CRA asks for payments throughout the year

When you're an employee, your employer deducts income tax, CPP, and EI from every paycheque and remits it to the CRA on your behalf. You file a T4 in the spring, maybe collect a modest refund, and forget the whole transaction happened.

When you're self-employed, nobody does that for you. Every invoice lands gross. The money sits in your account looking available. April 30 arrives and you owe $14,000 you'd mentally already spent on rent, equipment, and a long weekend in Banff.

Quarterly instalments exist to break that bill into four smaller payments throughout the year. They don't reduce what you owe — they just spread it out, smooth the CRA's cash flow, and replace the spring surprise with something you can plan around.

The moment most freelancers find this page: you filed your first full year of self-employment, received a Notice of Assessment with a significant amount owing, and then got a follow-up letter saying you're required to pay by instalments. That letter is not a penalty. It's the system working as designed. The question is how to navigate it without overpaying or triggering interest.

Do you actually need to pay instalments?

You're required to pay quarterly instalments for 2026 if both of these are true:

1. Your 2026 net tax owing will exceed $3,000 — or $1,800 if you live in Quebec (Quebec residents also owe provincial instalments to Revenue Québec separately)
2. Your 2025 net tax owing exceeded that threshold, or your 2024 net tax owing exceeded it

Both conditions must be true. If neither of the two prior years crossed the threshold, instalments aren't required for 2026 — though you can always pay voluntarily if it helps your cash flow planning.

What "net tax owing" actually includes

For self-employed Canadians, it's not just income tax. Net tax owing for instalment purposes includes:

• Federal and provincial income tax not withheld at source
• CPP contributions on self-employment income — you pay both the employee and employer portions: 11.9% (CPP1) on net self-employment income in 2026, up to a maximum of $8,460.90; higher earners between $74,600 and $85,000 also pay CPP2 at 8%, up to an additional $832 (source: canada.ca)
• Voluntary EI premiums, if applicable

Because CPP1 alone can reach $8,460 at higher income levels, many freelancers cross the $3,000 instalment threshold much earlier in their income curve than they expect.

First year of self-employment? You likely owed $0 in tax in both previous years, so no instalments are required. Pay your full year-one bill by April 30, 2027. The instalment obligation starts year two.

If you're staying on top of income and expenses throughout the year rather than scrambling in February, Kountr's freelance bookkeeping software gives you a running view of what you're likely to owe — so your estimate for the current-year method is grounded in real numbers, not a guess.

2026 instalment due dates

Quarterly due dates fall on the 15th of March, June, September, and December each year. When the 15th is a weekend or CRA-recognized public holiday, the deadline shifts to the next business day. A payment received or postmarked by the due date is considered on time. (Source: CRA payment due dates)

The March 16 shift catches people every few years. If you scheduled a payment for March 15, verify it will land on or before March 16.

Three ways to calculate what you owe

The CRA offers three calculation options. You can use whichever one produces the lowest payment — the key is knowing when each makes sense. (Source: CRA options to calculate instalments)

Option 1: No-calculation (use the CRA's reminder amounts)

The CRA mails instalment reminders twice a year: one in February covering the March and June payments, and one in August covering September and December. Each reminder pre-prints exact amounts — you pay those figures and no instalment interest is charged, guaranteed.

How the CRA calculates the reminder amounts:

• March and June: each equals one-quarter of your net tax owing from two years ago (2024)
• September and December: each equals half of whatever is needed to bring your annual total in line with last year's net tax (2025)

The result: if your income grew between 2024 and 2025, the quarterly amounts are uneven — smaller in Q1/Q2 (based on older, lower income) and larger in Q3/Q4 (catching up to last year).

Best for: Freelancers with stable, predictable year-over-year income.

Option 2: Prior-year

Calculate your 2025 net tax owing — income tax plus CPP contributions plus any voluntary EI premiums — and divide by four. Pay that equal amount on each of the four due dates.

If you pay 100% of last year's confirmed net tax on time, the CRA will not charge instalment interest for 2026 — even if your income grew and you end up owing a balance at tax time. That balance is due April 30 but is not subject to instalment interest, only to regular late-payment interest if you miss that April deadline.

Best for: Freelancers whose income grew in 2026 but who know their confirmed 2025 number precisely and prefer equal quarterly payments.

Option 3: Current-year

Estimate your 2026 net tax owing as accurately as you can. Divide by four. Pay that amount quarterly.

This option minimizes outgoing cash if your income dropped significantly from 2025 — but it requires a reliable estimate. Underestimate and you'll owe compound daily interest on the shortfall at each instalment date.

Best for: Freelancers whose income dropped materially from the prior year.

Side-by-side worked example

Alex is a freelance web developer in Ontario with consistently growing income:

• 2024 confirmed net tax: $10,000
• 2025 confirmed net tax: $12,000
• 2026 estimated net tax: $14,000

No-calculation Q1/Q2 = $10,000 ÷ 4 = $2,500 each; Q3/Q4 = ($12,000 − $5,000) ÷ 2 = $3,500 each.

Three things this table shows:

1. No-calculation and prior-year land on the same annual total ($12,000 = 2025 net tax), but distribute differently — no-calculation front-loads smaller payments then corrects in Q3/Q4; prior-year is perfectly even.
2. Both result in a $2,000 balance due April 30 because Alex's actual 2026 liability is $14,000. No instalment interest applies under either method, as long as payments were made in full and on time. The $2,000 balance is subject only to regular interest if it's paid after April 30.
3. Current-year front-loads the most cash but leaves zero balance owing in April — useful if April cash flow is tight or if Alex wants a clean slate.

If Alex's 2026 income dropped and his estimated net tax fell to $8,000, the current-year option would cut each quarterly payment to $2,000 — saving $4,000 in prepaid tax relative to the prior-year method.

What happens if you pay late or underpay

The CRA charges compound daily interest on late or insufficient instalments at the prescribed rate — reported at 7% for the first two quarters of 2026 by the Globe and Mail. The prescribed rate is updated quarterly; check the CRA prescribed interest rates page for the current figure.

A separate instalment penalty applies if your total instalment interest for the year exceeds $1,000. The penalty equals 50% of the amount by which your instalment interest exceeds the greater of: $1,000, or 25% of what the interest would have been if you'd made no payments at all. In plain terms: missing payments by small amounts rarely triggers the penalty; ignoring instalments entirely for a full year almost always does.

Paying late is always better than not paying — the interest clock stops the day your payment posts.

How to make instalment payments

The CRA accepts four methods:

• Online banking: add the CRA as a payee in your bank's bill payment ("Canada Revenue Agency – T1 instalment"). Use your Social Insurance Number as the account number.
• CRA My Account: pay via the "Pay now" button using Interac Online.
• Pre-authorized debit: set up automatic withdrawals from your bank account in CRA My Account.
• In person: at your bank or credit union with Form INNS3, or by mailing a cheque payable to the Receiver General for Canada with Form INNS3.

Confirm the payment type is recorded as "personal income tax — instalment" so the CRA doesn't park it in the wrong account. This mix-up happens more than it should.

Common mistakes self-employed Canadians make

1. Treating the first-year grace period as ongoing. You get one free pass: the year you have no prior self-employment tax history. Year two, the obligation starts. Many people miss year-two instalments because they think the rule still doesn't apply.
2. Forgetting CPP when estimating net tax owing. Rough income tax estimates are easy. CPP contributions — which hit 11.9% of net self-employment income — add thousands more. The $3,000 threshold catches freelancers faster than they expect once CPP is factored in.
3. Using last year's number without adjusting for income changes. If you landed two major contracts mid-year, the prior-year method may leave you with a larger April balance than expected. Revise your estimate mid-year and consider switching to the current-year method.
4. Paying into the wrong CRA account. Online banking payees can be confusing. "CRA payroll" and "CRA T1" are different. Instalments must go to your personal income tax account. If it lands in the wrong bucket, you'll get a missed-payment notice even though you paid.
5. Treating the CRA reminder as a cap. If your income jumped significantly, the February reminder amounts — calculated from 2024 data — will be well below what you actually owe. Pay the reminder amounts only if they reflect your current-year reality; otherwise, top up voluntarily.
6. Assuming Quebec rules match the rest of Canada. Quebec residents have a $1,800 federal threshold and must also pay provincial instalments to Revenue Québec under separate rules and deadlines. That's two systems to track, not one.

Keep your books current so the estimate is never a guess

The biggest variable in every instalment calculation is your year-to-date net income — the one number you can control by staying on top of your books. A rough estimate in August is how people underpay and end up with an interest bill.

Kountr's freelance bookkeeping software tracks income, expenses, and HST/GST automatically using bank sync and receipt OCR, so you have a live read on your financials when instalment season arrives. It won't calculate your instalments for you — that's between you, your accountant, and the CRA — but it makes sure the numbers you're working from are accurate.

For the other quarterly obligation freelancers often underestimate, see our guide to filing GST/HST as a freelancer in Canada.