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You handle tax instalments in your books as prepayments of your own tax, paid on four dates: March 15, June 15, September 15 and December 15 for 2026. The CRA says you may have to pay them if your net tax owing is over $3,000 ($1,800 in Quebec) for 2026 and in either 2025 or 2024. Net tax owing means tax and CPP after credits and anything already withheld.
Most sole proprietors first hear about this after a big first year, when a bill for the whole thing lands in April. Instalments spread that bill out.
Do you have to pay instalments?
Check two things: this year’s expected net tax owing, and the same figure for the last two years. Owing over the threshold now, and in at least one of the two earlier years, is the trigger. Farmers and fishers with self-employment income have one date instead, December 31.
Take Sam, who started a landscaping business in Saskatoon last spring. His first year ends with a $6,000 bill in April. Because he owed nothing in the two years before that, the second half of the test wasn’t met, so no instalments were required. This year he does have a big prior bill, and the CRA will likely send a reminder.
When a date falls on a weekend or a holiday the CRA recognizes, a payment received the next business day counts as on time. The CRA also mails reminders to people who are likely to owe instalments.
Which of the three options should you use?
| Option | Amount is based on | Best when |
|---|---|---|
| No calculation | The CRA’s figures from your latest assessed return, shown on its reminder | Income is steady |
| Prior year | Last year’s return | This year looks like last year |
| Current year | Your estimate of this year’s net tax owing, CPP and voluntary EI | Income jumped or fell |
Pay in full by the due dates under the first two options and the CRA charges no instalment interest or penalty. The current year option carries the same protection, unless your estimate was too low.
If you make your payments in full by the 2026 due dates, the CRA will not charge instalment interest or a penalty, unless your estimated instalment amounts are too low.
Options to calculate, required tax instalments for individuals, canada.ca
What does a real schedule look like?
Say your Ontario business nets $100,000 this year. The self-employed tax calculator shows $19,044.97 of income tax and $9,292.90 of CPP, or $28,337.87 in all. Split in four, each instalment is about $7,084.47. (That tool leaves EI out and applies deductions to income tax but not CPP, so your own number may differ a little.)
Now say last year’s net tax owing was $18,000 and yours will jump. Under the prior year option you’d pay in line with that $18,000 (about $4,500 a quarter), and you’d owe the rest in April. That’s allowed if you make the payments in full and on time, but you need the cash ready for spring. It’s a bit like borrowing from the taxman for a few months, so don’t spend the difference.
Try your own numbers in the tax instalments calculator. With $9,000 expected, $8,000 owing last year and $4,000 two years ago, it says instalments are needed and shows $2,250 a quarter. Used late in the year, it flags the dates that have already passed, tells you to pay the missed ones now to catch up, and names the next date, which is December 15 for 2026.
How do you record instalments in your books?
For a sole proprietor, book each payment as owner’s drawings. It’s your personal tax, so it never touches business profit. In the $100,000 example, that’s a $7,084.47 withdrawal on each date. Add a memo with the quarter, and keep the bank confirmation. At tax time those payments go on your return as tax you’ve already paid.
A corporation is different. It pays monthly, or quarterly if it qualifies as a small Canadian-controlled private corporation with on-time GST/HST, payroll and returns. Those payments sit in a prepaid tax account until the return sets the year’s tax. To sanity check the year, use the corporate tax calculator. For $100,000 of Ontario small business profit it shows $11,696, but treat that as an estimate, since the Ontario small business rate changed on 1 July 2026 and the calculator blends the two.
Instalment mistakes that cost interest
Skipping a quarter because cash is tight. Using last year’s amount after a raise. Paying the business account’s balance instead of the tax you actually owe. And forgetting the year end, which is also when owner’s drawings and tax paid should tie back to your CRA account.
A separate savings account for tax helps more than any software. Move a fixed share of every deposit into it. Roughly 28% works for the $100,000 example above (28,338 out of 100,000), though your rate will differ.
What if your income drops mid year? Recalculate on the current year option and pay less, but keep a note of how you estimated it. A one-page note with your income guess and the tax it produced is plenty.
Where we got these figures
The threshold, due dates and calculation options come from the CRA pages on required tax instalments for individuals and its 2026 business deadlines. Corporate payment timing comes from the CRA’s corporate instalment pages. Amounts come from our 2026 calculators. The late-instalment interest rate changes often, so it isn’t listed here. Check the CRA before you plan around dates for 2027.
Frequently asked questions
When are tax instalments due in 2026?
March 15, June 15, September 15 and December 15 for most individuals. Farmers and fishers pay once, on December 31.
Who has to pay instalments?
The CRA says you may have to if net tax owing is over $3,000 ($1,800 in Quebec) for 2026 and in either 2025 or 2024.
How do I book an instalment as a sole proprietor?
As owner's drawings. It's your personal tax, so it doesn't reduce business profit.
What if I already missed a payment this year?
Pay it as soon as you can and keep paying the later ones. The CRA may charge instalment interest, and we couldn't confirm the current rate.
Can I pay installments even if I don't have to?
Yes. Paying early spreads the cost, and it can shrink an April bill.
- Self-employed taxes in Canada: income, CPP and GST
How tax works when you are self-employed in Canada: reporting income and expenses, paying both halves of CPP, instalments and when to register for GST