Do you have to pay tax in installments?
The year-two surprise that catches a lot of contractors: once you owe enough at filing, the CRA stops waiting until April and wants your tax in four payments through the year. Here's when that kicks in and how to stay ahead of it.
The rule: over $3,000, two years running
You have to pay by installments when your net tax owing is more than $3,000 in the current year and it was also over $3,000 in one of the two previous years. Net tax owing is what's left after any tax already withheld — and since a self-employed contractor usually has nothing withheld, your net tax owing is basically your whole tax bill. That's why installments hit the self-employed so reliably: cross $3,000 owing twice, and you're in.
The trap is the timing. You sail through year one paying in April. Then in year two the CRA starts mailing installment reminders, and suddenly you owe a chunk in March — before you've even filed. Nobody warned you; the rule just quietly switched on.
The four dates
Personal installments are due on the same four days every year:
- March 15
- June 15
- September 15
- December 15
Miss one and installment interest starts compounding daily — currently in the high single digits — so it's worth automating the payments even if the amounts are estimates.
How this connects to your set-aside
The good news: if you're already following the monthly set-aside this calculator gives you, the installments are covered — you're putting money aside anyway, you're just sending some of it to the CRA four times a year instead of holding all of it until April. Run your numbers to see your monthly figure, then split it across the four installment dates.
Common questions
Do self-employed contractors have to pay tax quarterly?
Not at first — but you generally have to start paying by quarterly installments once your net tax owing is more than $3,000 in the current year and was also over $3,000 in either of the two previous years. Because nothing is withheld from a self-employed income, that threshold is easy to cross, so most established contractors end up on installments.
When are CRA tax installments due?
Personal tax installments are due four times a year: March 15, June 15, September 15 and December 15. Miss a date and interest starts compounding daily, so many contractors set up automatic payments.
How much should each installment be?
You have three options: pay the amounts on the reminder the CRA mails you (the no-calculation option, which protects you from interest), pay one quarter of last year's tax each time (the prior-year option), or estimate this year's tax and pay a quarter each time (the current-year option, best if your income dropped). If you're unsure, the CRA reminder amount is the safe default.
What happens if I don't pay installments?
If you were required to pay and didn't — or paid late or too little — the CRA charges installment interest, compounded daily, and in some cases an additional penalty. It's one of the more avoidable costs in self-employment: the obligation is predictable, so plan for it.
Does paying installments mean I pay more tax?
No. Installments aren't extra tax — they're the same total tax, just paid through the year instead of all at once in April. At filing you reconcile: if your installments covered your bill you owe nothing more, and if you overpaid you get it back.
Keeping the paperwork straight is half of getting deductions right. Blue Crane captures receipts as you buy and builds an accountant-ready export, and its form maker builds the printable Ontario contractor forms. For compliance forms and rules, see Ontario Trade Registry.