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If you're running a business in Canada, there’s a good chance you’ve heard about tax installments. Maybe you’ve even received a letter from the CRA asking for them and thought, "Wait, what is this and why do I owe it?"
In this article, we're going to break down exactly what tax installments are, who needs to pay them, and how to stay on top of them.
We'll walk through corporate tax installments, personal tax installments, and GST or HST installments.
We’ll also cover what happens if you miss a payment or don’t pay enough throughout the year.
Corporate Income Tax Installments
Let’s start with corporate tax instalments first.
Who Needs to Pay Corporate Tax Installments?
Whether or not your corporation needs to make tax installment payments depends on how much tax it owed in the past.
The general rule is this: If your corporation owed more than $3,000 in total income tax in either of the last two years, or if it’s expected to owe that much this year, then the CRA wants you to start making installments.
Now let’s walk through a couple of simple examples to make that clearer.
Example 1 - Installment Maker Inc.
First, let’s look at Installment Maker Inc.
They were incorporated in 2024 and had a solid first year. Their total corporate tax owing for 2024 was $4,500.
Because 2024 was their first year in business, they didn’t need to make installment payments during that year. They just had to pay the full amount by their tax due date.
But in 2025, things change. Since they owed more than $3,000 in 2024, they now need to start making installment payments throughout 2025.
Example 2 - Just Getting Started Ltd.
Next up, we’ve got Just Getting Started Ltd.
This company is brand new in 2024 and expects to owe around $5,000 in corporate taxes for the year.
Even though that’s over the $3,000 threshold, they still don’t need to make installments in 2024, because it’s their first year.
But starting in 2025, they will need to make installments, based on what they owed in 2024.
So here’s the takeaway: if your corporation owed more than $3,000 in either of the past two years, or is expected to this year, installment payments are probably on your to-do list. But you get a bit of a break in your first year.
When Are Corporate Tax Installments Due?
Once your corporation is required to make tax installment payments, the next question is “when are those payments actually due?”
Let’s break it down.
All corporations can make monthly installment payments.
In fact, monthly payments are the standard. You’d make one payment each month, with the first payment due one month after the start of your fiscal year.
So if your year starts on January 1, your first payment is due January 31, then one each month after that.
But some small corporations may qualify to pay quarterly instead, which means just four payments a year instead of twelve.
So who qualifies for quarterly installments?
Your corporation must meet all of these conditions:
- It’s a Canadian-controlled private corporation
- It claimed the small business deduction in the current or previous tax year
- It had taxable income of $500,000 or less
- It had taxable capital in Canada of $10 million or less
- And it has a perfect compliance history
That last one means you filed and paid everything on time - things like payroll remittances, GST/HST, and corporate tax returns.
If you meet all those criteria, you can switch to quarterly payments.
And if your corporation uses a calendar year-end, meaning that its corporate year-end is December 31st, your quarterly due dates would be:
- March 31
- June 30
- September 30
- December 31
So to recap, all corporations can make monthly payments, but if your business is small and squeaky clean on CRA compliance, quarterly payments may be an option.
If it’s not clear whether you qualify for quarterly installments, you can always reach out to your accountant for some advice on the matter.
Corporate Tax Installments - How Much Do You Pay?
Now that you know when installment payments are due, the next question is “how much should you pay?”
The CRA gives you a few different options here, and which one you choose depends on your situation.
Let’s go over the three methods you can use.
Pay What CRA Says to Pay
First up is the no-calculation option
This is the simplest option. If the CRA sends you an installment reminder with suggested payment amounts, you can just follow those. The amounts are based on your actual tax from last year and the year before.
This method is easy and safe. If you pay what the CRA suggests, you won’t get hit with interest or penalties, even if your actual tax bill ends up being higher or lower.
Calculate Installments Based on Prior Year Amounts
Or you can use the prior-year option.
With this method, you calculate your installment payments based only on your tax payable from the previous year.
You divide that amount evenly across your installment periods, monthly or quarterly.
This one works well if your income is pretty stable from year to year.
Estimate Current Year Amounts
Lastly, you could look at using the current-year option
This method lets you estimate your current year’s tax and base your installment payments on that. So if your profits are down this year, you might be able to pay less.
But a quick warning, if you end up underpaying based on your estimate, the CRA could charge you interest.
So you want to be confident in your numbers, or talk to your accountant before going this route.
Let’s look at a quick example.
Let’s say your corporation owed $12,000 in tax last year. If you’re paying quarterly, you’d divide that by four which would mean $3,000 each quarter.
If you’re on a monthly schedule, you’d divide it by twelve and pay $1,000 per month.
So to wrap this part up, if you’re unsure, sticking with the CRA’s suggested amounts is the safest bet.
But if your business income has changed and you want to adjust your payments, your accountant can help you run the numbers.
For more info on corporate tax installments, check out CRA’s official guidance linked here.
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?
You’ll need to make personal tax installment payments if your net tax owing is more than $3,000 in either of the last two years, or if it’s expected to be over $3,000 this year.
If you live in Quebec, the threshold is a bit lower. Quebec’s threshold is $1,800 instead of $3,000.
Here’s a simple example:
In 2023, you had a small amount of self-employment income and ended up owing $2,000 when you filed your taxes, so no issue.
But in 2024, your business grew, and your tax owing jumped to $4,500.
Since your 2024 tax bill was over $3,000, even though 2023 was under the threshold, the CRA will expect you to make installment payments in 2025.
It only takes one year over the threshold for installments to kick in.
When Are Personal Tax Installments Due?
For most individuals, personal tax installments are due on the same four dates each year:
- March 15
- June 15
- September 15
- December 15
So if you’re required to make personal tax installments, plan to make four equal payments throughout the year on those dates.
If any of those dates land on a weekend or holiday, your payment is still considered on time if it gets to the CRA on or before the next business day.
How Much to Pay for Personal Tax Installments
You’ve got a few different options for figuring out how much to pay, just like with corporate tax installments.
Pay What CRA Says to Pay
First, there’s the no-calculation option.
If CRA sends you a reminder with suggested installment amounts, you can just follow their numbers. They base it on what you owed in the previous two years.
This is the safest option, because if you follow it, CRA won’t charge you interest or penalties even if you end up owing more or less.
Calculate Installments Based on Prior Year Amounts
Next, there’s the prior-year option.
You calculate your installments based on the total tax you owed last year, then divide that amount by four.
This can work well if your income is steady.
Estimate Current Year Amounts
Lastly, there’s the current-year option.
This one’s for people whose income might be lower this year. You estimate your 2025 taxes, divide by four, and pay that amount each quarter.
But, again it’s important to note that if you underpay, CRA can charge you interest. So make sure your estimate is solid, or talk to your accountant before using this method.
Here’s a quick example:
You owed $8,000 in personal income tax last year. Using the prior-year method, you’d pay $2,000 on each of the four due dates.
So to sum it up, if you expect to owe more than $3,000 in personal taxes, you may need to make installment payments next year.
CRA will usually send you a reminder, and if you follow their suggested amounts, you’re in the clear.
For more information on personal tax installments, check out CRA’s official guidance linked here.
GST/HST Installments
Alright, now let’s talk about GST and HST installments.
These don’t apply to everyone, but if you’re a GST/HST registrant who files annually, you might be required to make quarterly installment payments.
Who Needs to Pay GST/HST Installments?
GST/HST installments are only required if you meet two conditions:
- You file your GST/HST return once a year, and
- Your net GST/HST owing is more than $3,000 in either of the last two years.
So, if your net GST/HST was over $3,000 last year, then CRA will expect you to make installment payments this year.
If you file monthly or quarterly, you’re already paying your GST/HST throughout the year, so installments don’t apply to you.
When Are GST/HST Installments Due?
Installment payments for GST/HST are due one month after the end of each fiscal quarter.
For example, if your fiscal year ends on December 31, your installment due dates would be:
- April 30
- July 31
- October 31
- January 31
Each payment is due one month after the quarter ends, not on the quarter-end date itself, which is a bit different from corporate or personal tax installments.
How Much to Pay for GST/HST Installments
The easiest way to figure out your GST/HST installment amount is to take your net tax from last year and divide it by four.
So if your net GST/HST owing last year was $8,000, you’d pay $2,000 each quarter.
CRA may also send you installment reminders with suggested amounts. If they do, and you stick to those amounts, you won’t be charged interest or penalties, even if your actual net tax ends up being different.
And just like with other installments, you can estimate your current year’s GST/HST if what you expect to owe is lower, but you’ll want to be confident in your numbers to avoid any surprise interest charges.
For more info on GST/HST installments, check out CRA’s official guidance linked here.
How to Pay Tax Installments
Next up, let’s look at how to pay installments.
Thankfully, the CRA gives you a few convenient options, and they’re fairly similar across the different types of tax.
How to Pay Corporate Tax Installments
For corporate installments, you’ve got a few ways to pay:
Online banking
Online banking is a great way to go. You can log into your business bank account and pay the CRA just like you’d pay a regular bill.
Look for something like "Federal – Corporation Tax Payments" in your payee list. Make sure to enter your business number correctly to ensure it gets applied to the right account.
CRA My Business Account
If you’re set up with CRA’s online portal, you can make payments directly through there. You can also set up a pre-authorized debit if you want CRA to automatically withdraw the right amount on the right dates.
Mailing a cheque
Mailing a cheque is still an option, though not as common. If you go this route, make the cheque payable to Receiver General for Canada, and include a remittance voucher so the CRA knows what the payment is for.
How to Pay Personal Tax Installments
The options for personal tax installments are almost identical to paying corporate tax installments.
Online banking
For oline banking, you can log into your personal bank account and add a payee that will read something close to "CRA – Personal Income Tax Installment.".
You’ll use your social insurance number as the account number for personal tax installments.
CRA My Account
CRA My account is the individual version of CRA’s portal. You can make one-time payments or set up pre-authorized debit through there as well.
Mail a cheque
Again, mailing a cheque is less common but still a valid method.
Make the cheque out to Receiver General for Canada and include your remittance voucher.
How to Pay GST/HST Installments
If you’re required to pay GST/HST installments, here’s how to do it:
Online banking
With online banking, you’ll want to add a payee that looks something like "CRA – GST/HST Payment."
You’ll then use your GST/HST number to appropriately identify the business that the installments relate to. Your GST/HST number is usually your BN with "RT0001" at the end.
CRA My Business Account
You can also pay directly through CRA’s online portal or set up pre-authorized debit the same way as with corporate tax.
Pay GST/HST Installments By Mail
And if you’re old-school, you can send a cheque and include the GST remittance voucher. Just make sure your payment includes your GST number and the correct reporting period.
No matter which method you use, the most important thing is this: make sure your payment gets to the CRA on or before the due date.
Late payments mean interest, and that adds up faster than you'd think.
What Happens If You Don’t Pay?
So what happens if you don’t pay your tax installments?
The CRA can charge you interest, and in some cases, they may also charge a penalty.
Interest kicks in if you’re required to make installments and don’t pay enough on time.
It’s charged daily and compounded, so it adds up quickly, even if you end up paying your total tax bill by the end of the year.
Penalties are less common but can apply if two things happen:
- First, you didn’t follow the CRA’s suggested installment amounts
- And second, if the interest you owe on those missed or late payments adds up to more than $1,000
If both of those apply, the CRA may charge an additional penalty on top of the interest.
But the good news is that if you follow the CRA’s suggested payment amounts, you’ll avoid both interest and penalties, even if your final tax bill is higher or lower than expected.
So it’s worth staying on top of your installments to keep things smooth, simple, and stress-free.
Summary
And that’s a wrap on tax installments.
We covered corporate, personal, and GST/HST installments.
We looked at who needs to pay, when they’re due, how much to pay, and how to actually make the payments.
The key takeaway here is this:
If you’ve owed more than $3,000 in tax in the past, or you expect to owe that much this year, the CRA likely expects you to make installment payments.
And while it might feel like a hassle at first, staying on top of your installments can save you from surprise tax bills, interest, and penalties later on.
If you run an incorporated business in Canada and need help with bookkeeping or accounting, reach out and we can discuss how Avalon can be of service.
