Quarterly Tax Instalments for Self-Employed Ontarians: When You Must Pay and How

When you are employed, your employer withholds income tax from every paycheque and remits it to the CRA throughout the year. You receive your T4 in February and file a return in April — usually a small refund or modest balance owing.

When you are self-employed, nobody withholds anything. If your tax situation warrants it, the CRA expects you to make quarterly tax instalments — periodic payments toward your estimated annual tax bill — rather than paying everything in one lump sum in April. Missing required instalments does not get you off the hook; it just means you owe interest on top of whatever you owe at filing.

This article explains the instalment regime, when it applies to Ontario self-employed people, how to calculate the amounts, and how to stay on the right side of the CRA.

When Do Instalments Apply?

The CRA requires quarterly instalments when your net tax owing (federal income tax plus provincial income tax, minus credits and withholdings) exceeds a prescribed threshold in the current year and was above that threshold in one of the two preceding years. As of writing, this threshold is $3,000 federally (and separately for Quebec residents) — confirm the current amount with the CRA, as it can change.

For most self-employed Ontarians with meaningful net income, this threshold is crossed relatively quickly. The practical rule of thumb: if you owed more than a few thousand dollars at last year's filing, expect to be required to pay instalments this year.

Instalment Due Dates

The CRA sets four instalment due dates annually, typically:

• March 15
• June 15
• September 15
• December 15

As of writing — confirm current due dates with the CRA, as dates shift when they fall on weekends or holidays.

Three Methods to Calculate Your Instalments

The CRA offers three acceptable calculation methods. You are free to use any of them; the CRA will not penalize interest if you pay the minimum required under any of these methods.

Method 1: Prior-Year Option (Simplest)

Pay one-quarter of your prior year's net tax owing each instalment period. The CRA actually sends you instalment reminder notices in February and August suggesting amounts based on this method. You are not required to use their suggested amounts, but paying them is a safe harbour.

Method 2: Current-Year Estimate

Estimate what you expect to owe in the current year and divide by four. This is useful if your income has dropped significantly — you avoid overpaying and tying up cash. However, if you underestimate and owe more at filing, interest applies on the shortfall.

Method 3: Two-Year Option

Pay two instalments based on the second-prior year (March and June), then adjust the September and December payments based on the prior year. This hybrid is rarely used in practice but is available.

Interest on Late or Insufficient Instalments

The CRA charges prescribed rate interest (set quarterly — check the CRA website) on late, missed, or insufficient instalment payments, calculated from the date each instalment was due to the date you pay. Importantly, the CRA does not send a bill for instalment interest in real time — you see the charge on your Notice of Assessment after filing.

There is a partial offset: if you overpay one instalment, the overpayment earns "credit" at the same prescribed rate, which reduces (but may not eliminate) interest on other shortfalls.

How to Pay

CRA instalments can be paid through:

• Online banking — add "CRA personal income tax — instalment" as a payee (most major Canadian banks list this)
• CRA My Account — pay directly from a linked bank account
• Pre-authorized debit set up in My Account
• At your financial institution in person
• By mail with a remittance voucher from the CRA

Keep your payment confirmation. The CRA has occasionally misapplied payments; having proof of payment dates is valuable if a dispute arises.

What If Your Income Fluctuates?

Self-employment income is notoriously irregular. The current-year-estimate method gives you flexibility to pay less in slow quarters and more in strong ones — but requires careful tracking. Many self-employed Ontarians find it simpler to use the prior-year method (just match what the CRA suggests) and then keep a cash reserve to cover any balance at filing.

A separate savings habit helps: whenever you receive a business payment, set aside your estimated combined income tax and CPP proportion. Automating this transfer to a dedicated savings account means instalment time is never a scramble.

Instalments vs. the April 30 Balance-Owing Deadline

A common misunderstanding: even self-employed people with a June 15 filing deadline must pay any balance owing by April 30. Instalments reduce your balance owing at filing — they are advance payments against your eventual annual tax bill. If you have paid sufficient instalments throughout the year, your April 30 balance will be small or zero. If you have underpaid instalments and owe a large balance, interest on that balance also begins running from April 30 (not June 15).

Frequently asked questions