Some Canadian freelancers pay their income tax in four instalments through the year instead of one lump sum at filing time. Whether you have to comes down to how much tax you owe on your self-employment income. This is one of the most common surprises in a freelancer's second year, so here is exactly how it works and how to stay ahead of it.
Do freelancers have to pay tax quarterly in Canada?
Not everyone does. You are required to pay your income tax by quarterly instalments when your net tax owing is more than $3,000 in the current year and was also more than $3,000 in one of the two previous years. For residents of Quebec, the federal threshold is $1,800, because Quebec collects its provincial portion separately.
"Net tax owing" is the tax left after any amounts already withheld. An employer withholds tax on every paycheque, so an employee usually has little left to owe at filing. As a freelancer, nobody withholds anything, so the full bill lands at filing time. Once that bill crosses the threshold two years running, the CRA wants it spread across the year rather than paid all at once.
Why does the CRA make you pay in advance?
Because employees pay as they earn. Tax comes off their pay all year, so the government receives its money in a steady stream. Freelancers earn the same kind of income with no withholding, so instalments are how the CRA puts self-employed people on a similar schedule.
That matters because it is the same tax you would owe regardless, spread into four payments across the year rather than landing all at once. It is not a penalty and it is not an extra charge. The first year you cross the threshold still tends to catch people off guard, because you can owe a large amount at filing and get told you now owe instalments going forward, in the same season.
When are the quarterly instalment due dates?
For most people, income tax instalments are due four times a year:
- March 15
- June 15
- September 15
- December 15
If a due date lands on a weekend or a public holiday, your payment counts as on time when the CRA receives it on the next business day. Put all four somewhere you will actually see them, because the CRA does not send a bill the way a client would. It sends a reminder, and missing it still costs you.
How much do you have to pay each quarter?
You have three ways to work out each instalment, and you can use whichever is cheapest for your situation:
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The no-calculation option. The CRA sends instalment reminders telling you exactly what to pay each quarter, based on your past returns. Pay those amounts on time and you will never owe instalment interest, even if you end up earning more this year. This is the safe default for most freelancers.
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The prior-year option. Base your instalments on the tax you owed last year, split into four. This fits when this year looks a lot like last year.
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The current-year option. Estimate what you will owe this year and pay a quarter of it each time. Use this when your income drops, so you are not overpaying based on a stronger year. If you guess too low, you can owe interest.
For most freelancers, simply paying the no-calculation amounts on the reminders is the move. It is the one option that guarantees no interest.
What happens if you skip or underpay an instalment?
The CRA charges instalment interest, compounded daily, on the amount you should have paid and did not. If that interest grows large enough in a year, an additional instalment penalty can apply on top. A single missed quarter is rarely a disaster, but it is pure waste, money you are handing over for no reason.
There is a useful quirk in your favour: instalment interest works on a running balance, so if you underpay one quarter you can reduce or cancel the interest by overpaying an upcoming instalment or paying it early. If you fall behind, catching up quickly is worth it.
How to actually stay on top of instalments
The instalment system rewards one boring habit: setting money aside as you earn it, so the quarterly payment is already sitting there when the date arrives. A lot of freelancers move a fixed percentage of every payment into a separate account the day it lands, which turns instalment day into a transfer instead of a scramble. Our guide to how much tax to set aside as a freelancer pairs directly with this.
It also helps to know your number before instalment season. The amount you owe comes off your net self-employment income, the figure you report on your T2125 after subtracting your business write-offs. The more your legitimate deductions bring that number down, the smaller your instalments. And if you have crossed the $30,000 GST/HST registration threshold, keep in mind that GST/HST can carry its own separate instalment schedule, tracked apart from your income tax.
Loot keeps your invoices, expenses and CRA categories in one place, so the income and deduction numbers that drive your instalments stay current all year instead of being reconstructed every quarter. It is Canadian, built for freelancers, and free to start.
Frequently asked questions
Do all self-employed people in Canada pay tax quarterly? No. You only pay by instalments when your net tax owing is over $3,000 (over $1,800 for Quebec residents) in the current year and in one of the two previous years. Below that, you pay once when you file.
What are the income tax instalment due dates? March 15, June 15, September 15, and December 15. If a date falls on a weekend or holiday, your payment is on time when the CRA receives it the next business day.
What does "net tax owing" mean? It is the income tax you still owe after subtracting any tax already withheld or credited. Freelancers rarely have anything withheld, so their net tax owing is usually close to their full tax bill.
Do I have to calculate my own instalments? No. The CRA sends instalment reminders with the amounts to pay. Paying those no-calculation amounts on time means you will never owe instalment interest, which makes it the simplest safe choice.
What happens if you skip or underpay an instalment? The CRA charges instalment interest, compounded daily, on the shortfall, and can add an instalment penalty if that interest is large enough in a year. You can offset it by paying a later instalment early.
This is general information and not tax advice. Reviewed for accuracy against Canada Revenue Agency guidance. For your own situation, check with an accountant or the CRA.