Personal Tax Instalments
Curious about personal tax instalments? Then you are not alone. This is a question the VR team sees frequently. Actually, there are a few questions. But #5 and #6 seem to be the most popular.
What are Personal Tax Instalments?
Personal tax instalments are pre-payments of the tax that you are expected to owe for the current calendar year. If you are paying instalments during 2025, these are for your 2025 personal tax year. The pre-payments are intended to reduce the tax that you would owe in April 2026 for the 2025 calendar year.
Do Personal Tax Instalments apply every year?
If you owed more than $3,000 on your last tax return (2024), CRA will request instalments for the next calendar year (2025).
CRA will assess your return in spring and then send notices for instalment amounts in August (for September and December payments) and the following February (for March and June payments).
When are Personal Tax Instalment payments due?
Instalment payments are usually due: March 15, June 15, September 15 and December 15.
If this is the first year you need to make instalments, CRA will request instalments for 50% of your tax owing on September 15 and again on December 15. The total amount will be split between 4 payments in the subsequent years.
Let’s use an example where you owed $20,000 for your 2024 personal tax filing and $0 on your 2023 tax filing.
Since this is the first year you are over $3,000, you will now have an instalment requirement. In August 2025, CRA will send you a notice requesting an instalment of $10,000 for September 15 and a further $10,000 for December 15. By paying these amounts during the year, you should have a much smaller tax payment requirement in April 2026 (providing your income remains similar).
CRA will then send you another notice in February 2026, requesting instalments of $5,000 (1/4 of $20,000) for March 15 and June 15. After you file your 2025 tax return, CRA will send revised instalment notices for the September and December payments.
What happens if I miss a payment or am late?
CRA will charge interest at their current prescribed rate for the number of days that you are late. If you would like to offset this non-deductible interest, you can make your next payment a similar number of days early.
If you choose not to make the instalment payment and your installment interest is greater than $1,000 CRA can also choose to apply a non-deductible penalty of the greater of $1,000 or 25% of the interest charged.
Given the increased interest rates, it is beneficial to pay the instalments where possible.
What if my income and tax amounts will be lower in the following year?
Another option for calculating instalment payments is to use your estimated income and related tax for the current year. This is where the VR team can help the most.
Maybe you had a large transaction in the prior year that is not expected to occur again in the current year. This would certainly skew your prior year tax bill and your instalment requirement to be much higher than actual. And odds are, after paying all that tax last year, there isn’t the same cash flow to pay the extra high instalments in the following year.
When that is the case, the VR team can calculate a revised tax estimate (based on your estimated income to date). Not sure on your estimated income? Connect us with your investment advisors and we can work through this together. Then you can make instalment payments on a tax number that is more realistic.
One thing to keep in mind with this approach is that if you have unexpected income that occurs late in the year, this could cause a jump in your tax and CRA may then deem some of your payments to have been insufficient and you could still have some interest owing. The more confident you are in the estimated information, the easier it is for the team to calculate a reasonable tax estimate.
Looking for a shortcut?
Your corporate tax filings with VR include personal tax estimates based on the information available at that time. If those estimates still reflect your anticipated income, then you could use those estimates to manage your ongoing instalment requirements.
Want to clarify specific items for your situation? The VR team is always happy to hear from you. Send an email or call and we can assist you!
The above material is current as of February 7, 2025.
The information presented is a general overview and not intended to cover specific situations. You should consult with your professional advisors directly before taking any action.
Vertefeuille Rempel Chartered Professional Accountants LLP, its partners, employees and agents do not accept or assume any liability by anyone relying on the information presented.