The first bad surprise for many self-employed workers: unlike employees, nobody withholds tax from your income during the year. The second one comes in the mail: the CRA and Revenu Québec ask you to pay your taxes in advance, four times a year, through tax instalments. Here is how it works in 2026 — who has to pay, how to calculate them, and how to avoid interest charges.
What is a tax instalment?
A tax instalment is a periodic tax payment you make during the year, instead of paying everything when you file your return. It is the self-employed equivalent of the source deductions employees see on every paycheque. Instalments cover federal and provincial income tax, but also your Québec Pension Plan (QPP), QPIP and Health Services Fund contributions.
Who has to pay instalments?
The thresholds are different federally and in Quebec:
- CRA (federal): you must pay instalments if your net tax owing is more than $3,000 for the current year and for either of the two previous years.
- Revenu Québec: the threshold is $1,800 of net income tax payable, with the same logic.
In other words, if this is your very first profitable year of self-employment, you generally have no instalments to pay that year — but brace yourself for the next one, because the first year’s tax bill and the second year’s instalments often land at the same time.
The four due dates
| Payment | Due date |
|---|---|
| 1st payment | March 15 |
| 2nd payment | June 15 |
| 3rd payment | September 15 |
| 4th payment | December 15 |
Good to know: when the date falls on a Saturday, Sunday or statutory holiday, you have until the next business day.
How to calculate your instalments: three methods
The CRA and Revenu Québec accept three calculation methods. You can pick whichever works in your favour:
- No-calculation method: you simply pay the amounts shown on the reminders the CRA and Revenu Québec send you (based on your past returns). No interest risk if you pay those amounts on time, even if they turn out to be too low.
- Prior-year method: you pay one quarter of last year’s tax at each due date.
- Current-year method: you estimate this year’s tax and pay one quarter at each due date. Attractive when your income is dropping — but if you underestimate, interest applies.
Tip: if your income is stable or growing, the no-calculation method is the safest. If your income is falling (lost a big client, parental leave), the current-year method keeps you from lending money to the government.
What happens if you don’t pay?
Instalment interest is charged at the prescribed rate, compounded daily, on every missing or insufficient payment. Federally, an additional penalty can apply when instalment interest exceeds $1,000. Not dramatic for one late payment, but it adds up fast — and the prescribed rates of recent years are anything but symbolic.
Good news: you can reduce or eliminate that interest by making a late payment as soon as possible, or by overpaying the following instalments — overpayments earn “credit interest” that offsets the charges.
Don’t forget GST and QST
If you file your sales tax returns annually and your net tax reaches $3,000, you must also make quarterly GST/QST instalments. To understand registration, rates and input tax credits, read our complete GST and QST guide for self-employed workers.
The real challenge: having the money set aside
Calculating instalments is easy; the discipline is not. The golden rule of self-employment: set aside 25% to 35% of every payment you receive in a separate account (income tax + QPP/QPIP + net sales taxes). When the due date arrives, the money is already there.
That is exactly where good bookkeeping pays off. With InnoBooks:
- ✅ you see your year-to-date income and profit in real time, and therefore your estimated tax;
- ✅ your deductible expenses are tracked all year — they directly reduce the income your instalments are based on (see our guide to deductible expenses);
- ✅ GST/QST collected and paid is calculated automatically, return after return;
- ✅ your reports are ready for your accountant, with no year-end scramble.
Frequently asked questions about tax instalments
I never received a reminder from the CRA. Do I still have to pay?
If you received no reminder, the CRA will not charge interest on payments it never asked for. Be careful though: Revenu Québec operates separately, and your income tax balance is still due by April 30.
My income jumped this year. Will my instalments be too low?
If you follow the no-calculation method (the reminder amounts), no interest will apply even if the total is too low — you will simply pay the balance in the spring. Plan your cash flow accordingly.
Can I pay monthly instead of quarterly?
Yes. Nothing stops you from paying more often or earlier than the due dates — it is actually a sound cash-flow strategy, and early payments generate credit interest that offsets any later shortfall.
Do instalments cover my QPP and QPIP contributions?
Yes. Revenu Québec’s reminders include Quebec income tax, QPP, QPIP and, where applicable, the Health Services Fund. On the federal side, instalments cover federal income tax.
Bottom line
Instalments are not an extra tax — just the same tax, paid as you go. Remember the thresholds ($3,000 federally, $1,800 in Quebec), the four dates (March, June, September, December 15), pick the calculation method that works for you, and above all: set a percentage of every payment aside the day it comes in.
Want to know where you stand at all times? Try InnoBooks for free: income, expenses and taxes tracked in real time, for stress-free instalments.