CRA Instalment Reminder: Do You Have to Pay? Your Three Options, Explained (2026)

The letter looks like a bill. It is not one.

An instalment reminder is a calculation the CRA mailed you — a suggestion for how to pre-pay next April's tax in four pieces — not a balance you owe today. Nothing has gone wrong. You are not in trouble. You have not been audited, flagged, or fined.

What the letter actually asks of you is one decision: how do you want to pay tax on income that nobody withholds tax from? You have three legal ways to answer, and in one specific situation the honest answer is "I don't owe instalments at all this year." This page walks through all four, in plain language, with the actual rules cited.

Why you got this letter

The CRA sends instalment reminders to people whose tax isn't collected at the source — the self-employed, landlords, people with investment income, retirees whose pension withholding runs light. The trigger is specific: you're asked to pay by instalments for 2026 if your net tax owing is more than $3,000 in 2026, and was also more than $3,000 in either 2025 or 2024. In Quebec the threshold is $1,800, because Revenu Québec collects the provincial side separately.

Both conditions have to be true. One good year, on its own, doesn't put you in the instalment system — which is why the first reminder typically lands the year after your first real tax bill. The CRA mails reminders twice a year: a February letter covering the March 15 and June 15 payments, and an August letter covering September 15 and December 15.

The amounts printed on the letter come from your past returns. The CRA does not know what you're earning right now. That fact matters more than anything else on this page, and it's where your three options come from.

Your three options, decoded

The CRA gives you three ways to calculate what to pay. They're listed on the reminder itself, and the trade-off between them is simple: certainty versus accuracy.

Option 1: pay the printed amounts (the no-calculation option)

Pay exactly what the reminder says, by each date it says. If you do this, the CRA guarantees it will charge no instalment interest — even if the printed amounts turn out to be less than your actual tax for the year. That's the safe harbour, and it's the option to take when you don't want to think about this again until filing time.

The catch is cash flow, not risk: the printed amounts are based on your past income. If this year is bigger, you'll pay the remaining balance at filing time, which is fine. If this year is smaller, you'd be lending the CRA money it will eventually refund — which brings us to the other two options.

Option 2: prior-year math

Calculate instalments from your 2025 net tax owing (plus any CPP contributions payable and voluntary EI premiums). This helps in one specific shape of year: 2024 was unusually large — a one-off capital gain, a contract windfall — and the no-calculation amounts are inflated by it, but 2025 looks like your normal. Option 2 lets you pay based on the recent, representative year instead.

Option 3: current-year math

Estimate your 2026 net tax owing yourself and pay a quarter of it at each date. This is the option for the year your income drops — fewer clients, parental leave, a deliberate slow year. You pay instalments matched to what you're actually earning, not what you used to earn.

Here is the honest risk, stated plainly: with options 2 and 3, if you pay less than the printed amounts and your estimate runs low, the CRA charges instalment interest on the shortfall, compounded daily at the prescribed rate — currently 7% for April 1 to June 30, 2026. The interest is computed with an offset method, so early or catch-up payments earn credit that cancels charges, and nothing is charged at all if the total comes to $25 or less. A penalty on top of the interest exists, but it only enters the picture if your instalment interest alone exceeds $1,000 — a threshold most freelancers never approach.

So the real decision rule is one sentence: if this year's income is the same or higher than the letter assumes, pay the printed amounts and forget about it; if this year's income is genuinely lower, options 2 or 3 let you legally pay less — as long as your estimate is honest.

The case where you owe no instalments at all

Remember the trigger: instalments are only required if your 2026 net tax owing will be more than $3,000 ($1,800 in Quebec). The reminder is generated from your past returns — the CRA cannot see that you closed your business in January, took a salaried job with withholding, or are having a one-off quiet year.

If you expect your 2026 net tax owing to come in at or under the threshold, you can set the letter aside and pay nothing. If you're right, there is no interest and no penalty — there was never anything to pay instalments on. If you're wrong, the consequence is the same as a low estimate under option 3: instalment interest on what you should have paid, from each missed date, at the prescribed rate. Not a fine. Not a flag on your file. Daily interest on a shortfall, which a catch-up payment can largely offset — we work that math out here.

If you've been carrying the letter around unopened for three weeks, that's also fine. Nothing about an instalment reminder compounds while it sits in a drawer. The dates are what matter, and the next one is always visible below.

The dates that matter

Individual instalments are due four times a year. When a due date lands on a Saturday, Sunday, or a public holiday recognized by the CRA, your payment counts as on time if it's received the next business day.

Payment	Due date	Covered by which reminder
Q1	March 15	February letter
Q2	June 15	February letter
Q3	September 15	August letter
Q4	December 15	August letter

(One exception: if your main income is from farming or fishing, you have a single instalment date — December 31.)

Note what's not on this list: April 30. Instalments are pre-payments toward next spring's balance. Whatever you pay through the year gets credited against the tax you calculate when you file, and the remainder — in either direction — settles then.

What to actually do this week

1. Open the letter. Find the printed amounts and the two due dates it covers.
2. Ask one question: is my income this year about the same, higher, or clearly lower than the year those numbers came from?
3. Same or higher → pay the printed amounts by the printed dates. You're done, and no interest is possible.
4. Clearly lower → estimate your 2026 net tax owing. Over $3,000 ($1,800 in Quebec)? Pay a quarter of your estimate per date (option 3). At or under the threshold? You can pay nothing — just be honest with the estimate.
5. Set reminders for the remaining dates. The interest risk in this system almost never comes from choosing the wrong option. It comes from forgetting a date.

How to make next quarter's letter boring

The instalment system runs on one input: knowing, roughly, what you'll owe this year — before the year is over. That's the part the letter can't do for you, and the part that turns each reminder from a small ambush into a non-event. If you're setting aside a slice of every payment as it lands, the quarterly dates stop being events. VRITTI keeps a running estimate of your next instalment with a countdown to each CRA date, so the February letter tells you something you already knew.

Either way — app, spreadsheet, or a sticky note on the monitor — the goal is the same. The first instalment reminder is startling because it's about money you haven't set aside yet. Every one after that is just the CRA confirming your own math.

This article explains CRA rules in plain language; it isn't tax advice for your specific situation. Figures verified against CRA pages June 2026 — the prescribed interest rate resets quarterly, so check the current rate before relying on it.

Sources

• CRA — Required tax instalments for individuals (the three calculation options)
• CRA — Who has to pay instalments ($3,000 / $1,800 trigger)
• CRA — Instalment payment due dates
• CRA — Instalment interest and penalty charges
• CRA — Prescribed interest rates, Q2 2026