December 15 Tax Instalment Deadline: What Ontario Owners Must Pay

December 15 is the last tax instalment deadline of 2026, and for Ontario business owners who pay tax by instalments, it is the one that matters most. Miss it or underpay it, and the Canada Revenue Agency charges interest at 7 percent, compounded daily, on the shortfall. This article explains who must pay instalments, how the December 15 amount is calculated, and what to do before the deadline arrives.

Who has to pay instalments

You are required to pay tax by instalments for 2026 if your net tax owing will be more than $3,000 this year ($1,800 if you are a Quebec filer) and was also more than $3,000 in either 2025 or 2024. This rule catches many Ontario business owners: incorporated professionals, consultants, sole proprietors with growing income, landlords, and anyone whose employment withholding does not cover their total tax bill.

For individuals, the Income Tax Act sets four instalment dates: March 15, June 15, September 15, and December 15. Corporations generally pay monthly instalments, although eligible Canadian controlled private corporations that meet CRA’s conditions may pay quarterly instead. Do not confuse the instalment obligation with the filing deadline. Filing your T1 by April 30 or your T2 six months after year end reports your income. Instalments are how you pay the tax during the year. They are two separate obligations, and interest accrues on each independently. You can confirm the current rules on CRA’s instalment requirements page.

Farmers and fishers follow a different schedule, with a single annual instalment due December 31 if they receive a CRA reminder. Everyone else on the instalment system faces December 15.

How the December 15 amount is calculated

CRA allows three methods to determine each quarterly instalment, and you may choose whichever produces the lowest payments. Understanding the December 15 calculation under each method is the key to getting it right.

The no-calculation option. Under this method, CRA does the math for you. Your March and June instalments are each set at 25 percent of your 2024 balance owing. Your September 15 and December 15 instalments are then set so that your total for the year matches your 2025 balance owing: each one is 50 percent of the difference between your 2025 balance owing and what you already paid in March and June. In practice, this means the December 15 instalment is often the largest of the four, because it is the true up payment that brings your total instalments in line with last year’s actual tax bill. If your 2025 income was significantly higher than 2024, expect a large December 15 amount.

The prior-year option. Each of your four 2026 instalments equals one quarter of your 2025 balance owing. This method works well when your 2026 income, deductions, and credits will look similar to 2025, but your 2024 was an unusual year, perhaps because you sold securities and reported a large capital gain in 2024 that will not repeat.

The current-year option. You estimate the tax you will owe for 2026 and pay one quarter of that estimate on each instalment date. This is the right choice if your 2026 income will be significantly lower than 2025. It is also the riskiest, because if your estimate proves too low, you face instalment interest, compounded daily at the prescribed rate, and a potential instalment penalty on top.

What it costs to get it wrong

Instalment interest is charged at the CRA prescribed rate, compounded daily. For the fourth quarter of 2026, covering October 1 to December 31, the rate on overdue tax is 7 percent. That rate applies to any instalment shortfall, and it sits on top of the regular interest on any balance owing at filing time.

There is also an instalment penalty. If the instalment interest charged for the year exceeds $1,000, CRA may assess a penalty equal to 50 percent of the amount by which that interest exceeds the greater of $1,000 or 25 percent of the interest that would have applied if you had made no instalments at all. In other words, a meaningful underpayment does not just cost interest. It can cost a penalty calculated on that interest. CRA sets out the full calculation on its instalment interest and penalty page.

Consider a simple illustration. An Ontario consultant owes $40,000 in total tax for 2026 and pays nothing by instalment. Roughly speaking, the instalment interest on four missed quarterly payments of $10,000, compounded daily at 7 percent, runs into the low four figures, and the penalty may apply on top. The exact figure depends on timing, but the direction is clear: at 7 percent compounded daily, the CRA is an expensive lender, and instalment interest is not deductible.

What to do before the December 15 instalment deadline

• Pull your CRA account balances this week. Log in to CRA My Account or My Business Account and confirm what has been paid and what remains. Do not rely on memory or on your bookkeeper’s spreadsheet alone.
• Revisit your 2026 income estimate. If your income came in higher than expected, particularly from a property sale, a large contract, or investment gains, your December 15 instalment under the no-calculation option may be larger than you think. Run the numbers now, not on December 14.
• Choose your calculation method deliberately. If 2026 will be a lower income year than 2025, the current-year option may reduce your December 15 payment legitimately. But document your estimate and keep it reasonable. An aggressive lowball that proves wrong invites interest and penalty.
• Pay on time, even if you cannot pay in full. A late instalment still stops the interest clock from the date CRA receives it. Partial payment beats no payment.
• Talk to your accountant about the corporate side. If you operate through a corporation, confirm whether you are on monthly or quarterly instalments and whether your corporation still meets the conditions for quarterly treatment. A corporation that drifted offside during the year may owe monthly amounts it never paid.

The bottom line for Ontario owners

December 15 is not a soft deadline. It is the final instalment date of the year, it is frequently the largest payment of the four, and the cost of missing it is 7 percent interest compounded daily plus a possible penalty. The business owners who get this right are the ones who check their numbers in November, choose their calculation method with eyes open, and pay on time.

This article is for informational purposes only and does not constitute professional tax or financial advice. Please consult a qualified accountant for advice specific to your situation.

Ready to get your instalments right? Book a free consultation or call (437) 966-0033. Taxmetic helps Ontario business owners stay compliant and keep more of what they earn.

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