Do you have to pay tax instalments, and how much?

What an instalment is, and why owners get asked for them

A tax instalment is part of this year's tax paid during this year instead of after it. The total amount of tax stays exactly the same, and only the timing changes. The money leaves your account through the year rather than in one payment months after the year has ended.

An employer takes tax off every paycheque and sends it to the Canada Revenue Agency, the federal agency that collects tax. An employee is therefore already paying through the year, a little at a time. A dividend, which is a payment of company profit to a shareholder, has nothing held back at all, and the same is true of a corporation trading profitably on its own account. Instalments put both on the same footing as the employee.

Leaving a salaried job for your own corporation therefore tends to produce a first instalment reminder about eighteen months later. An instalment reminder is a letter, form INNS1, printing the amounts the CRA is asking you for. Nothing has gone wrong when one of these letters arrives. The CRA generates it automatically once a return it assessed shows more tax owing than the figure below.

Whether you have to pay them at all

The CRA's corporate instalment threshold is $3,000 for the 2026 tax year, and it's applied to each part of the tax on its own rather than to the total. Federal tax is one part, being Part I tax at line 700 of the T2 return plus lines 720, 724 and 727 where a return has any, and the provincial or territorial tax the CRA collects alongside it (line 760) is the other. A part goes into instalments only where it's above $3,000 in the current tax year and above it in the previous tax year as well. Landing at or below $3,000 in either year means that part is paid in one go on the balance-due day, so a corporation can owe federal instalments and no provincial ones at all.

Where last year ran shorter than twelve months, which is common in a corporation's second tax year, its tax is scaled up to a full year before either test uses it (e.g. a first year that ran only four months counts at roughly three times its actual tax). There's a separate exemption for the first tax year after incorporation, which holds whatever the tax for that year comes to. A corporation formed by amalgamation doesn't get it, because the tax its predecessors paid counts as its last year's.

The personal test has two halves and both of them have to hold before you owe anything. Your net tax owing, which is what you actually had to pay on filing once the tax already withheld from you comes off, has to be above the CRA's $3,000 threshold for 2026 and above it in either 2025 or 2024. Landing exactly on $3,000 doesn't count, because the rule is written as more than rather than at least. One unusual year therefore can't put you into instalments on its own. A 2026 figure that comes in at or below $3,000 means you owe nothing in instalments, whatever the reminder asks for.

The amount printed on the reminder is worked from returns the CRA has already assessed, so paying it in full and on time is the one thing the CRA can't charge interest against. The condition that flips it is a current year you can already see coming in well below the last one (e.g. where last year carried a one-off gain on a property sale that won't repeat). Working out a lower figure of your own then keeps cash in your hands that you wouldn't otherwise get back until after the following April 30. Its downside is that an estimate coming in low sets interest running from each due date.

The three options a corporation can choose between

Option 1 spreads this year's estimated tax evenly across the year: a twelfth each month, or a quarter each quarter for a corporation eligible to pay quarterly. Option 1 gives the smallest total where this year is genuinely lighter than last. The catch is the estimate itself, because a figure that comes in low leaves a shortfall the CRA charges interest on. Neither of the other two options carries an estimating risk of that kind.

Option 2 spreads last year's tax evenly instead, so there's nothing to estimate and nothing to get wrong. Its downside is that a corporation whose tax has fallen pays more across the year than it will owe. That excess sits with the CRA in the meantime, doing nothing for your working capital.

Option 3 is the CRA's combined option, and it exists for a corporation whose tax has been rising year on year. The monthly version puts a twelfth of the tax for the year before last into each of the first two months, then a tenth of what is left of last year's tax into each of the remaining ten. The quarterly version puts a quarter of the tax for the year before last into the first quarter, then a third of the remainder into each of the other three. Option 3 comes to the same total as option 2 unless the opening payments alone exceed last year's tax, which takes a year before last more than six times the size of last year (four times on the quarterly schedule), because the payments after them can't drop below nil. Option 3 asks for less at the start of the year wherever last year's tax was higher than the year before's, and its downside is option 2's downside, because the total it works from is last year's tax rather than this year's.

The calculator prices all three for each part that's due and adds the parts together, as the CRA's own worksheet does, then names the lowest. The protection from interest depends on which one that is. Options 2 and 3 are worked from tax the CRA has already assessed, so paying either in full and on time leaves the CRA nothing to charge even where the final bill turns out higher. Option 1 rests on your own estimate, and where the year comes in higher than the estimate (and a previous-year option would have asked for more) the CRA charges interest on the shortfall from each due date.

The two dates in a first instalment year

Personal instalments fall on March 15, June 15, September 15 and December 15. The CRA works the printed amounts out from the returns it has already assessed, rather than from anything you tell it. March and June each take a quarter of your net tax owing from two years back, and September and December each take half of what's left of last year's net tax owing after those two.

In a first instalment year there's no figure two years back to take a quarter of. March and June therefore come out at nil, and the whole of last year lands on September 15 and December 15. The CRA sends its reminders in February and in August, so a first instalment year usually brings only the August letter.

The year that pattern falls in is the expensive one, and it's worth funding before the September date arrives. On April 30 you settle last year's balance owing, which is everything still unpaid on the return you have just filed. Across September and December you then pay last year's tax over again as instalments. The year after that brings four normal payments and is unremarkable next to it.

What this calculator leaves out

The calculator works out amounts and dates, and it stops short of instalment interest, i.e. the charge on any part of an instalment you skip or underpay. The instalment penalty that can sit on top of that charge is left out for the same reason. Our guide on the first instalment year, linked at the foot of this page, carries both of those along with the interest rate. This page deliberately doesn't state that rate, because the CRA resets it every three months and a figure moving that often is safer kept in one place than in two.

The arithmetic assumes the current tax year runs a full twelve months, so a short tax year still in progress sits outside it, and it takes the year before last as a full year too. Only last year can be short, and the calculator asks how many days it ran. A dividend refund or a refundable tax credit isn't taken off the payments either, although the Income Tax Act takes a twelfth of each off every monthly payment. Farmers and fishers, who pay on a single December date, fall outside the arithmetic as well, and so do Quebec's own instalments, which run through Revenu Québec.

Alberta is the one province whose own instalments the calculator leaves out. Alberta collects its corporate tax itself, on the AT1 return, under section 38 of the Alberta Corporate Tax Act, so for an Alberta corporation the page tests and prices the federal part only. That section differs from the CRA's rules in two ways worth knowing: a Canadian-controlled private corporation that claimed Alberta's small business deduction this year or last, with taxable income inside the section's limit, pays its Alberta tax three months after its year-end instead of by instalments, and Alberta's small-balance exemption sits lower than the CRA's.

Two worked examples