September 15, 2026 Personal Tax Instalment: How to Calculate It Correctly (And When You Can Skip It)
Reviewed by Bader A. Chowdry, CPA, CA, LPA on
Every September, a subset of self-employed Canadians, retirees drawing pension and investment income, and owners of rental or investment property get an unwelcome reminder from the CRA: a third instalment is due September 15. Unlike payroll employees, whose tax is withheld and remitted for them, instalment payers are effectively pre-paying next April’s tax bill in four chunks. Miss the math and the CRA charges compounding daily interest — not a flat penalty, which makes it easy to underestimate how fast the cost grows on a large underpayment.
Who actually has to pay a September instalment?
You owe instalments if your net tax owing exceeded $3,000 in the current year and in either of the two preceding years ($1,800 for Quebec residents, since Quebec collects part of the tax provincially). “Net tax owing” is the gap between your total tax bill and what was already withheld at source — so a T4 employee with side rental income that isn’t withheld-on can trip this threshold even with a modest salary. The CRA sends instalment reminders (not requirements) in February and August; getting one doesn’t automatically mean you owe money this year if your circumstances changed, but ignoring the underlying math when you genuinely do owe is what generates interest charges.
How do I calculate my September 15 instalment correctly?
The CRA gives individuals three ways to calculate each instalment, and you’re allowed to pick whichever produces the lowest total for the year — with one catch: if you underestimate using the current-year method and you’re wrong, interest applies from each due date as if you’d used the no-calculation amount. The no-calculation option simply pays what the CRA calculated on your instalment reminder (based on your prior-year return) — safest, but can overpay if this year is genuinely lighter. The prior-year option uses last year’s actual tax bill divided into four, adjusted if this year’s instalment reminder differs. The current-year option estimates this year’s actual liability — appropriate if your income dropped materially (e.g., you sold a rental property last year and won’t again), but it carries real downside risk if the estimate comes in low, since CRA does not forgive interest on estimation error.
What happens if I skip or underpay my instalment?
The CRA charges instalment interest, compounded daily, on the shortfall between what you should have paid under the no-calculation/prior-year method and what you actually paid, running from each missed due date to the date you file. There is also a smaller instalment penalty layered on top if the interest charge itself exceeds $1,000 in a year. Because the interest calculation effectively “tops up” underpayments as if the safest method had been used, the practical risk of the current-year option is asymmetric: guess right and you save cash-flow; guess wrong and you pay interest on the gap plus, in some cases, the penalty. CRA does allow offsetting — overpaying one instalment reduces the interest exposure on a later one — but the interest clock on each date is unforgiving once it starts.
Case study: catching a $2,400 instalment gap before it compounded
A Mississauga-based consultant client came to us in August 2026 after receiving a CRA instalment reminder based on a strong 2025 (a one-time contract that inflated net tax owing well past $3,000). 2026 income was running roughly 40% lower with that contract gone. Rather than blindly paying the no-calculation amount, we ran the current-year estimate, confirmed it with year-to-date invoicing and a conservative Q4 buffer, and documented the calculation in case CRA later questioned the lower payment. Net result: a $2,400 reduction in the September and December instalments combined, with zero interest exposure because the current-year estimate was defensible and reasonably close to the eventual filed number — the two things that matter if CRA ever asks you to justify using that method.
Special cases worth knowing
Farmers and fishers filing under the two-thirds rule have only one instalment date (December 31) rather than four — different mechanics entirely, don’t apply the quarterly schedule above to farm income. New instalment payers — anyone with net tax owing over the threshold for the first time in 2026 — will not see a reminder for September because CRA reminders are based on prior-year data; that doesn’t mean the obligation doesn’t exist, only that you have to self-identify it. And instalment interest is not deductible against income, unlike, say, interest on funds borrowed to invest — a detail that surprises clients who assume all CRA-related interest is at least a wash at tax time.
Comparing the three methods side by side
The no-calculation option is safest because CRA guarantees no interest applies if you pay exactly the amount on your instalment reminder by each due date, even if that amount later proves too high or too low relative to your actual return — the trade-off is potential overpayment sitting with CRA for months instead of earning interest in your own account. The prior-year option works well when your income is stable year-over-year and you’d rather calculate the number yourself than wait for CRA’s reminder, but it carries the same overpayment risk as no-calculation if this year is genuinely lighter than last. The current-year option is the only one that can reduce your instalments when income has dropped, but it shifts the entire burden of accuracy onto your estimate — CRA will charge interest calculated as though you’d used the no-calculation amount for any shortfall, with no allowance for a good-faith miss. In practice, we default clients to the no-calculation or prior-year method unless there’s a clear, documentable reason income has dropped — the interest savings from a lower current-year estimate rarely outweigh the risk of getting the estimate wrong on a volatile year.
How this connects to your December 15 instalment
Because the same net-tax-owing test determines whether you owe an instalment at all, getting September’s calculation right sets up December correctly too — if your current-year estimate for September turns out to be too low once more of the year’s income is known, adjusting the December 15 payment upward can reduce (though not eliminate) the interest that would otherwise accrue on the full-year shortfall. Waiting until you file the following April to true everything up is the most expensive path, since by then interest has been accruing on any gap since March.
Frequently asked questions
Q: Do I have to pay the September instalment if I already paid March and June in full?
A: Yes — each of the four dates is assessed independently under the method you’re using; paying earlier instalments in full doesn’t exempt a later one unless your total liability for the year has genuinely dropped below the $3,000 threshold.
Q: What if my 2026 income will clearly be lower than 2025 and 2024?
A: The current-year option lets you pay based on your estimate, but document the basis (invoices, contracts ending, T4 changes) — CRA can request support if the final return shows a large gap from what was paid.
Q: Can I pay a September instalment late without interest if I pay before December 15?
A: No. Interest accrues from the missed date, not from year-end. Paying “late but before the next instalment” still generates interest for the days the payment was outstanding.
Q: Where do I find the CRA’s current prescribed interest rate?
A: CRA publishes it quarterly on canada.ca under “Prescribed interest rates” — always check the rate for the specific quarter in question rather than assuming it matches a prior quarter, since it can and does move.
Sources & references
- CRA instalment guide — canada.ca.
- CRA prescribed interest rates — canada.ca.
- Income Tax Act, R.S.C. 1985, c.1 (5th Supp.), ss.156, 156.1, 161 — laws-lois.justice.gc.ca.
Related Insight Accounting CPA resources
- Pillar — Tax Filing Deadlines in Canada 2026 — the full-year deadline calendar this September instalment date fits into, including March, June, and December.
- Book — 30-minute instalment review with Bader — no obligation.
Important — informational only, not advice. Do not use this article to make any decision.
This article is published by Insight Accounting CPA Professional Corporation for general educational purposes only. It is not tax, legal, accounting, financial, or investment advice, and nothing in this article should be relied upon — by anyone, for any purpose — to make a business, tax, financial, accounting, legal, or investment decision.
Tax law, CRA administrative positions, court interpretations, and Ontario provincial rules change frequently, sometimes retroactively, and the content of this article may be incomplete, simplified, out of date, or wrong by the time you read it. The right answer for your specific situation depends on facts this article does not know — your structure, history, jurisdiction, filings, contracts, and goals.
Before acting, engage your own Chartered Professional Accountant or qualified advisor who has reviewed your specific circumstances in writing. Insight Accounting CPA Professional Corporation, the author, and any contributors expressly disclaim all liability — direct, indirect, or consequential — for any action taken or not taken on the basis of this content.
Insight Accounting CPA Professional Corporation is led by Bader A. Chowdry, CPA, CA, LPA — licensed by CPA Ontario under the Public Accounting Act, 2004. To engage us for situation-specific advice, book a free 30-minute discovery call.
