By late March, most Toronto corporations with a calendar or near-calendar fiscal year have already made — or are about to make — their first corporate tax instalment payment of 2025. Instalments are one of the least-discussed parts of running a corporation, largely because they run quietly in the background compared to the year-end T2 filing. But an instalment base that is off by even a modest percentage compounds over the year into either a large balance owing at filing time (plus instalment interest) or an interest-free loan to the CRA sitting in overpaid instalments instead of your working capital. March, when a Q1 instalment is either just paid or coming due, is a practical checkpoint to confirm the base is right for the rest of the year.
Who has to pay instalments, and how often
The Canada Revenue Agency requires most corporations to pay their estimated annual federal and provincial tax in instalments throughout the year rather than as a single payment when the return is filed, if the total tax payable is expected to exceed $3,000 for the year (and it exceeded $3,000 in either of the two preceding years).
Source: Canada Revenue Agency — When your corporation has to pay instalments.
Most corporations pay monthly instalments, due on the last day of each month. A narrower group — small Canadian-controlled private corporations that claimed the small business deduction, have taxable income under the qualifying threshold, and have a perfect compliance history with CRA over the preceding 12 months — can instead pay quarterly instalments, due on the last day of each quarter (March 31, June 30, September 30 and December 31 for a calendar-year corporation).
Source: Canada Revenue Agency — Eligibility for quarterly instalments.
For a calendar-year Toronto CCPC on quarterly instalments, the March 31 payment is the first of the year — which makes March the natural month to confirm the base the payment was calculated on, before three more quarters compound any error.
The three ways CRA lets you calculate your instalment base
CRA gives corporations a choice of calculation method, and picking the wrong one for your situation is the single most common cause of a mismatched instalment base:
| Method | How it's calculated | Best fit for |
|---|---|---|
| No-calculation option | CRA calculates the instalment based on the prior year (or the two years before if the prior year isn't assessed yet) | Corporations with stable or slowly changing income year to year |
| Prior-year option | You estimate based on the prior year's tax, adjusted for known changes | Corporations that know income will differ from CRA's default estimate but can reasonably estimate the prior year's actual tax |
| Current-year option | You estimate the current year's tax directly | Corporations with a good forecast for the current year, e.g., known one-time income or a planned decline |
Source: Canada Revenue Agency — Calculating instalment payments.
A Toronto business that grew meaningfully in 2024 and is using the no-calculation option is effectively basing 2025 instalments on a smaller prior year — which understates the instalments now and risks a larger balance owing (plus instalment interest calculated back to the original due dates) when the 2025 T2 is filed next year. Conversely, a business that had an unusually strong 2024 but expects 2025 income to normalize may be overpaying instalments all year on the no-calculation default, tying up cash that could sit in an interest-bearing account or fund operations instead.
Why this matters more with a changing small business rate environment
Ontario corporations that qualify for the small business deduction are taxed at Ontario's small business rate on active business income up to the Ontario small business limit, with the general corporate rate applying above that limit. Because the small business limit and rate are set by provincial legislation and can change between tax years, a corporation's effective combined federal-Ontario rate for the current year is not always identical to the prior year's — another reason the no-calculation option's assumption of "same as last year" can drift, on top of any change in income itself.
A practical checklist for Q1
- Confirm which instalment method your accountant or bookkeeping software is using — no-calculation, prior-year, or current-year — and whether it still fits your 2025 income trajectory.
- If 2024 income was unusually high or low relative to a normal year, ask specifically whether the current-year option would produce a more accurate (and often lower, if income is normalizing) instalment base than the CRA default.
- Check your instalment payment history against CRA My Business Account to confirm the March payment posted correctly and matches what was calculated — a missed or misapplied instalment is easier to fix in April than to untangle at year-end.
- If you're on quarterly instalments, confirm you still meet the eligibility conditions — losing eligibility mid-year (for example, from a compliance issue or exceeding the taxable income threshold) shifts you to monthly instalments, and missing that shift creates a gap CRA will charge interest on.
- Revisit the instalment base again mid-year rather than treating the Q1 calculation as fixed for all of 2025 — income forecasts change, and CRA lets you switch calculation methods between instalment periods.
For background on how the Ontario small business rate and limit interact with your instalment planning, see our Ontario corporate tax guide and small business deduction limit guide. Our corporate tax calculator is a quick way to sanity-check an estimated current-year tax figure against your instalment base.
Key takeaways
- Corporations expecting more than $3,000 in total tax payable generally must pay instalments — monthly for most, quarterly for eligible small CCPCs with a perfect compliance history.
- CRA offers three instalment calculation methods (no-calculation, prior-year, current-year); the default no-calculation option can drift from reality when income is growing, shrinking, or the applicable tax rate has changed.
- A calendar-year CCPC on quarterly instalments pays on March 31, June 30, September 30 and December 31 — March is the natural first checkpoint of the year.
- Losing quarterly-instalment eligibility mid-year shifts a corporation to monthly instalments; missing that shift generates instalment interest.
- Reviewing the instalment base isn't a one-time March decision — CRA allows switching calculation methods between instalment periods as forecasts change.
If you want your 2025 instalment base reviewed against your actual income trajectory rather than left on CRA's default calculation, RN Canada works with Toronto-area CCPCs remotely on corporate tax planning from our Edmonton and Vancouver offices.