If you received a letter from the CRA this summer instructing you to make a tax instalment payment by 15 September 2026, there is no need to panic. This is not an audit, nor is it an error. It usually signals that you had a solid year, owed money at tax time, and the Canada Revenue Agency now expects you to pay tax in instalments spread out over the year rather than in a single payment. This article explains who must pay, how the amounts are determined, and what happens if you miss a payment.
Key takeaways
- The four 2026 personal tax instalments are due 15 March, 15 June, 15 September, and 15 December. The one landing now is the third, due 15 September 2026.
- CRA tax instalments for 2026 are required only if your net tax owing exceeds $3,000 ($1,800 for Quebec residents) in 2026 and in either 2025 or 2024.
- You have three methods to determine your payment: the no-calculation option, the prior-year option, and the current-year option. The lowest valid figure is the one you use.
- Missing a payment triggers instalment interest at the prescribed interest rate, 7% for the third quarter of 2026, compounded daily.
- An instalment penalty applies only when your total instalment interest for the year surpasses $1,000, so most late payers face interest but no penalty.
Who has to pay tax instalments in 2026
You may have to pay tax by instalments for 2026, and you are required to pay when both of these conditions hold:
- Your net tax owing is more than $3,000 in 2026 (more than $1,800 if you are a Quebec resident), and
- Your net tax owing was also above that amount in either 2025 or 2024.
The CRA's guidance on required tax instalments for individuals sets out both tests in detail. Net tax owing is the tax payable you still owe after the tax deducted at source. It is what remains once tax is deducted from your income. Employees seldom need to pay instalments, since tax is removed from every paycheque. The typical candidates are self-employed freelancers, commission earners, landlords, investors with large capital gains, and incorporated owner-managers who receive dividends without any tax withheld. If that fits your 2025 situation, you likely received an instalment reminder from the CRA in February and again in August.
An instalment reminder does not dictate the dollar amount you must pay. It represents the CRA's estimate. If you expect your 2026 income to be lower, you can pay a lesser amount using one of the options described below. If you receive an instalment reminder but your 2026 net tax owing will be $3,000 or less ($1,800 or less in Quebec), you are free to disregard it. Many Ajax and Pickering business owners who enjoyed one strong year followed by a quieter one find themselves in this situation.
The 2026 instalment payment due dates
Personal income tax is paid as four quarterly instalment payments throughout the year. You pay your instalments on these 2026 instalment payment due dates:
| Instalment | 2026 due date |
|---|---|
| First | 15 March 2026 |
| Second | 15 June 2026 |
| Third | 15 September 2026 |
| Fourth | 15 December 2026 |
When a due date falls on a Saturday, Sunday, or a recognized public holiday, your payment counts as on time as long as the payment is received by the CRA on the next business day. You can pay through your CRA My Account, online banking (add "CRA (revenue) tax instalment" as a payee), or pre-authorized debit. Do not wait for a bill to arrive by mail. The reminder is the only notice you receive, and interest starts accruing the day after the due date. You can verify the current instalment payment due dates and the prescribed interest rate on canada.ca.
Three ways to calculate your instalment payment
You have three choices for determining each instalment payment, and you may select the one that produces the lowest valid amount. There is no requirement to inform the CRA of your choice.
| Option | How the amount is set | Best when |
|---|---|---|
| No-calculation option | Pay the exact figures shown on your CRA instalment reminder. The CRA determines these figures from your most recent assessed tax return using its calculation chart for instalment payments. | Your income, deductions, and credits remain consistent year after year. |
| Prior-year option | You base the four payments on your 2025 net tax owing and divide it across the quarters. | Your 2026 will resemble 2025, but differ from 2024. |
| Current-year option | You estimate your 2026 net tax owing on your own and pay one quarter each time. | Your 2026 income will be well below that of 2025 and 2024. |
The no-calculation option is the safest. Under this approach, the first two instalments are based on your 2024 tax, due in March and June, while the last two are based on your 2025 tax. If you pay these amounts in full and on time, the CRA cannot charge instalment interest or a penalty, even if you owe more when you file in April. The prior-year and current-year options can improve cash flow when your income is declining, but there is a downside: if your estimate turns out to be too low, the CRA treats them as insufficient instalments and charges instalment interest on the shortfall. Make a conservative estimate, or stick with the no-calculation figure if you are uncertain.
Instalment interest and penalty charges on a missed payment
Here is the part people worry about. The CRA charges interest whenever your instalment payments are late or insufficient. Instalment interest is calculated on the unpaid tax and is compounded daily until you pay the balance of tax, so the longer you leave it, the more you pay interest. Priya runs a marketing consultancy in Pickering. Her 2025 net tax owing was $9,200, all from self-employment income with no tax withheld. Because she surpassed $3,000 in both 2025 and 2024, she must make instalment payments in 2026, and her prior-year option works out to $2,300 per quarter.
Cash flow is tight in September, so Priya skips the 15 September 2026 instalment and plans to catch up at filing time. The CRA charges instalment interest on that $2,300 from 16 September 2026 to her balance due date of 30 April 2027, at the prescribed interest rate, compounded daily. At the third-quarter 2026 rate of 7%, that late instalment costs her roughly $100 in interest. It is annoying but manageable, and no penalty applies because her total instalment interest for the year stays well below $1,000.
The penalty is a separate charge that applies only in larger cases. The CRA imposes an instalment penalty solely when your instalment interest for 2026 exceeds $1,000. To compute it, the CRA takes the higher of $1,000 or 25% of the interest you would have owed if you had not made any instalment payments, subtracts that figure from your actual instalment interest, and divides the result by two. Suppose a contractor accumulates $2,500 in instalment interest for 2026, and would have owed $3,200 with no payments. The higher figure is $1,000 (since 25% of $3,200 is $800). The penalty is therefore ($2,500 minus $1,000) divided by 2, which equals $750, in addition to the interest. That is the real price of ignoring instalments for a full year.
How to reduce instalment interest before it grows
If you are behind, there are options available. Two moves can reduce or eliminate instalment interest:
- Overpay or prepay your next instalment. Paying the December instalment early, or paying extra, earns instalment credit interest that offsets the interest charge on your late payment. This only works within the same tax year, so make use of it before 31 December.
- Cut the instalments at the source. If your income includes a pension, Old Age Security, or the Canada Pension Plan (CPP), you can request that more tax be withheld from it. Withhold enough and your net tax owing can drop below $3,000, which removes the instalment requirement altogether.
For owner-managers, this is also a planning discussion. Adjusting your salary-versus-dividend mix or your withholding levels during the year can keep you off the instalment cycle entirely. This is where day-to-day tax planning and advisory work pay for themselves.
Instalments catch many Durham Region business owners off guard the first year they cross the threshold, particularly after a strong performance. If you are uncertain whether the 15 September payment applies to you, or how much to send, we can review your figures in a few minutes. EK CPA Pro works with freelancers and owner-managers across Oshawa, Whitby, Ajax, Pickering, Clarington, Bowmanville, and Uxbridge, and we will identify the lowest legitimate amount for you to pay. Book a free 15-minute call and we will sort out your September instalment.
This article is for general information only and does not replace professional tax advice. Tax rules change, and your specific circumstances matter. Always confirm with a qualified CPA before making tax decisions.
