No employer withholds tax from freelance income in Canada, so the Canada Revenue Agency (CRA) may ask you to prepay it in four quarterly instalments. This guide explains who has to pay, the exact due dates, the 3,000 dollar threshold, and the three calculation methods, with one set of numbers worked through every method.
Rates last reviewed: October 2026.
Do self-employed Canadians have to pay tax by instalments?
You have to pay by instalments for 2026 only if two tests both pass: your net tax owing for 2026 is more than 3,000 dollars, or 1,800 dollars in Quebec, and it was also more than that threshold in either 2025 or 2024. If either test fails, you are generally not required to pay instalments for 2026.
This two-year test is why first-year freelancers are usually outside the system: with no prior year above the threshold, the second test fails even if the current year bill is large. The tax does not disappear. You pay the full balance when you file, unless you pay voluntarily to spread the cost.
A CRA reminder is not, by itself, proof that you must pay. The CRA page on who has to pay instalments states that if your 2026 net tax owing is at or below the threshold, you do not have to pay instalments for 2026. Check your own numbers before paying a reminder amount on autopilot.
Instalments cover income tax, plus Canada Pension Plan (CPP) contributions payable and any voluntary Employment Insurance (EI) premiums. They do not cover GST/HST, which has its own registration and filing rules. If you also collect GST/HST, use LancerBill’s GST calculator for that side of your taxes.
What counts as net tax owing, and how does the threshold test work?
Net tax owing is the tax left after credits and tax already withheld at source, plus CPP contributions payable and any voluntary EI premiums for the instalment calculation. Your province on December 31 decides the threshold, 3,000 dollars outside Quebec and 1,800 dollars in Quebec, and both the current year and one prior year must exceed it.
Three points in that definition catch people out. First, the threshold is about tax owing, not income: large deductible expenses and credits can leave a high-revenue freelancer below it, while a lower-revenue freelancer with few credits can sit above it. Second, tax already withheld reduces your net tax owing. Third, Quebec residents use the lower figure because Quebec collects its own provincial tax separately, and Quebec Pension Plan (QPP) replaces CPP there.
| 2026 net tax owing | 2025 or 2024 net tax owing | Instalments required for 2026? |
|---|---|---|
| More than 3,000 dollars (1,800 dollars in Quebec) | More than the threshold in either year | Yes |
| More than the threshold | At or below the threshold in both years | Generally no |
| At or below the threshold | More than the threshold in either year | No |
| At or below the threshold | At or below the threshold in both years | No |
Tip: Your notice of assessment shows your net tax owing for past years. Use those assessed figures for the prior-year test, not rough estimates.
When are instalments due, and what do CRA reminders cover?
Instalments for individuals are due on March 15, June 15, September 15 and December 15, except farmers and fishers, who pay once on December 31. The CRA sends reminders in February for March and June, and in August for September and December, and the February and August amounts together form the no-calculation option.
For 2026, March 15 is a Sunday, so payment is accepted on Monday, March 16. June 15 is a Monday, and September 15 and December 15 are Tuesdays. If a due date falls on a weekend or statutory holiday, the CRA accepts payment on the next business day, but set each payment a few days early rather than relying on that grace period.
| Instalment | 2026 due date | Covered by which reminder |
|---|---|---|
| First | March 15 (Sunday, so Monday, March 16) | February reminder |
| Second | June 15 (Monday) | February reminder |
| Third | September 15 (Tuesday) | August reminder |
| Fourth | December 15 (Tuesday) | August reminder |
The reminders use form INNS1 and show the no-calculation amounts, explained next. You can also view them in CRA My Account.
Do not confuse instalment dates with filing dates. For the 2026 tax year, self-employed individuals file their T1 return by June 15, 2027, but any balance owing is due by April 30, 2027. Missing an instalment date costs instalment interest even if you later file on time and pay the balance in full.
What are the three ways to calculate your instalments?
The CRA lets you choose the no-calculation option, the prior-year option or the current-year option, and you may use the one that gives the lowest required payments. The no-calculation option uses the CRA reminder amounts, the prior-year option uses last year’s net tax owing, and the current-year option uses your estimate for this year.
The CRA options page describes all three, and its calculation chart for 2026 walks through the arithmetic. The table below works one set of numbers through all three methods. Assumptions: net tax owing was 10,000 dollars in 2024, 12,000 dollars in 2025, and you estimate 8,000 dollars for 2026, each figure already including CPP contributions payable and any voluntary EI premiums.
| Method | March 15 | June 15 | September 15 | December 15 | 2026 total |
|---|---|---|---|---|---|
| No-calculation option | 2,500 dollars | 2,500 dollars | 3,500 dollars | 3,500 dollars | 12,000 dollars |
| Prior-year option | 3,000 dollars | 3,000 dollars | 3,000 dollars | 3,000 dollars | 12,000 dollars |
| Current-year option | 2,000 dollars | 2,000 dollars | 2,000 dollars | 2,000 dollars | 8,000 dollars |
Here is the arithmetic. No-calculation option: March and June are each 10,000 dollars divided by 4, which equals 2,500 dollars. September and December then bring the total to the 2025 figure: 12,000 dollars minus 5,000 dollars already paid equals 7,000 dollars, divided by 2, which equals 3,500 dollars each. Prior-year option: 12,000 dollars divided by 4 equals 3,000 dollars each. Current-year option: 8,000 dollars divided by 4 equals 2,000 dollars each.
Notice what the totals mean. The no-calculation and prior-year totals both equal the 2025 figure, 12,000 dollars, because both are anchored to past years. The current-year total equals your estimate, 8,000 dollars. If your 2026 bill really is 8,000 dollars, the current-year option avoids a 4,000 dollar overpayment you would wait until after filing to recover. If your estimate is low, that saving turns into interest.
Watch out: The September and December payments under the no-calculation option are often the largest of the four, because they correct for the gap between the two prior years. In this example they jump from 2,500 dollars to 3,500 dollars. Budget for that jump in August, when the reminder arrives, not in December.
There is one special case competitors often miss. If you received an August reminder only, with no March or June payment shown, the split changes: under either the prior-year or the current-year option you pay 75 percent of the total on September 15 and 25 percent on December 15. On a 12,000 dollar prior-year total, that means 9,000 dollars then 3,000 dollars. On an 8,000 dollar estimate, it means 6,000 dollars then 2,000 dollars. Do not divide an August-only reminder into four parts.
Which calculation method should you choose?
Choose the no-calculation option when income is steady, the prior-year option when this year looks like last year but not the year before, and the current-year option when this year will be very different, usually much lower. The right choice is the method whose required total matches your real bill most closely without underpaying.
Use this framework, and re-check it in August, when year-to-date income is a far better guide than a January guess:
| Your income pattern | Best method | Why it fits | Main risk |
|---|---|---|---|
| Steady year to year | No-calculation option | You pay the CRA amounts, with no estimating | You overpay if income quietly falls |
| This year looks like last year, but the year before was unusual | Prior-year option | It drops the unusual year | Equal payments hide a rising or falling trend |
| This year will be much lower than last year | Current-year option | Payments match the lower bill | Underestimating triggers interest and possibly a penalty |
| This year will be much higher than last year | Prior-year or no-calculation option | You pay on the lower past figure, then settle the rest | A large balance due on April 30 after year end |
Two practical rules sit behind that table. First, the CRA says that if you pay in full by the due dates under one of these options, it will not charge instalment interest or a penalty, unless your estimated amounts are too low. Pick a method deliberately and document your reasoning, rather than paying a round number that feels right. Second, you are not locked in for the year: you can switch methods as income changes. Keep a one-line note for each payment: the method, the figure it came from, and the date paid.
For how much of each payment to set aside in the first place, see our guide to how much tax a self-employed Canadian should set aside: that guide covers the percentage habit, while this guide covers the payment mechanics. For the full overview of what self-employed Canadians owe, see self-employed taxes in Canada.
What happens if you pay late, pay less, or miss an instalment?
If you are required to pay and you pay late or less than required, the CRA charges instalment interest, compounded daily at the prescribed rate, which changes every three months. A penalty can also apply, but only when your instalment interest for the year is more than 1,000 dollars, and it is calculated from that interest.
Instalment interest runs from the due date until payment is received, and it is charged on late or insufficient payments. The prescribed rate is set quarterly, so the rate on a missed March payment may differ from the rate on a missed December payment. Interest charged by the CRA is not deductible. Paying part of an instalment still helps, because interest is charged on the shortfall, not the full amount.
The penalty has a specific formula. The CRA interest and penalty page states that it applies only when instalment interest for the year is more than 1,000 dollars. The penalty equals half of the difference between your actual instalment interest and the higher of 1,000 dollars or 25 percent of the interest that would have applied if you had paid nothing.
Worked illustration, using hypothetical interest figures only: suppose actual instalment interest is 2,500 dollars, and interest if you had paid nothing would have been 3,200 dollars. Twenty-five percent of 3,200 dollars is 800 dollars, so the higher figure is 1,000 dollars. The penalty is 2,500 dollars minus 1,000 dollars, divided by 2, which equals 750 dollars. Total extra cost: 2,500 dollars of interest plus a 750 dollar penalty, on top of the tax itself.
How do you pay, reduce or stop instalments you no longer owe?
Pay each instalment by its due date through CRA My Account, your bank’s CRA payment service or pre-authorized debit, and keep the confirmation with your tax records. You can reduce or stop payments if your estimated net tax owing for the year falls to the threshold or below, or if instalments already paid cover your estimated bill.
Start from CRA My Account, where you can view your reminders and instalment account. Pre-authorized debit is the lowest-effort option for steady amounts. If your amounts change between quarters, a manual payment through My Account or your bank gives you control over each figure. Keep each confirmation with your method note, so a later CRA query can be answered from records, not memory.
You can reduce or eliminate instalments in two situations the CRA describes. If your estimated net tax owing for the year will be at or below the threshold, you do not have to pay instalments for that year, and you can disregard the reminders. If instalments already paid will cover your estimated bill, you can stop further payments. The August reminder is the natural moment to make this call, with eight months of actual income behind the estimate.
Good records make every step above easier. Net business income is revenue minus deductible expenses, reported on form T2125, so invoices and expense records are the raw material for every estimate here. Use LancerBill’s invoice generator for clean, dated invoices, and LancerBill’s profit margin calculator to check what a job leaves after costs. For what each Canadian invoice must show, see how to invoice as a freelancer in Canada.
Key takeaways
- Instalments are required for 2026 only if net tax owing exceeds 3,000 dollars, or 1,800 dollars in Quebec, in 2026 and in either 2025 or 2024.
- Due dates are March 15, June 15, September 15 and December 15, with farmers and fishers on December 31, and weekend dates move to the next business day.
- The no-calculation option uses CRA reminder amounts, the prior-year option uses last year’s figure, and the current-year option uses your estimate for this year.
- On the worked figures in this guide, the methods give 12,000 dollars, 12,000 dollars and 8,000 dollars, so the method you choose changes real cash flow.
- Instalment interest is compounded daily at the quarterly prescribed rate, and a penalty applies only when that interest exceeds 1,000 dollars.
Do I have to pay instalments in my first year as a self-employed Canadian?
Generally no. The test requires net tax owing above the threshold in the current year and in either prior year, and a first-year freelancer has no prior year above it. You still owe the full tax when you file, so consider paying voluntarily to avoid a large April balance.
What is the instalment threshold in Quebec?
The threshold in Quebec is 1,800 dollars, compared with 3,000 dollars elsewhere. Your province on December 31 decides which figure applies, and Quebec residents pay QPP rather than CPP.
Can I use a different calculation method from the one on my CRA reminder?
Yes. Reminder amounts are the no-calculation option, but you may instead use the prior-year or current-year option. Choose the method that matches your income pattern, document the figures behind it, and pay by each due date.
What happens if I only receive an August instalment reminder?
Pay 75 percent on September 15 and 25 percent on December 15, under either the prior-year or current-year option. Do not split the total into four payments.
Does paying my final tax balance on time cancel instalment interest?
No. Instalment interest is charged on late or insufficient quarterly payments from their due dates, and it stands even if you file on time and pay the final balance by April 30.
Are GST/HST payments part of income tax instalments?
No. Income tax instalments cover income tax, CPP contributions payable and voluntary EI premiums. GST/HST follows its own separate rules.
This guide is for general information only and is not financial, tax or legal advice.