Changing instalment amounts
When to change your instalment amounts
You can change the amount of tax you pay by instalments throughout the year based on changes to your anticipated income or credits, or if your business undergoes certain changes.
If your tax payable will be higher than you estimated
If you based your instalment payments on your estimated current-year tax payable (instalment calculation option 1) you should consider increasing the instalment payments you are making for the current tax year if your tax payable will be higher than you originally estimated.
If you based your instalments on last year's taxes (option 2) or a combination of the 2 previous years' taxes (option 3), you do not need to recalculate your payments to avoid interest, even if you think you will owe more this year. However, you may consider increasing your instalment amount if you want to avoid a large balance owing when you file your return.
Refer to: Instalment interest and penalties
If your tax payable will be lower than you estimated
You do not need to recalculate your instalment payments if your tax payable will be lower than you originally estimated. However, you may be able to reduce your payment amounts.
If your business status changed during the year
Some changes to your business, such as amalgamations, transfers, or rollovers, may require you to recalculate your instalments during the year.
Refer to: Situations that may affect your instalment calculations
How to change your instalment amounts
To change the amount of your instalment payments, simply recalculate and pay the new amounts. You do not need to notify us of your recalculations during the year.
Revise the worksheets you used at the beginning of the year to update the amounts used to calculate your instalment payments.
After you have redetermined the results for the options that apply to you, you can:
- Switch to a different option that now results in lower payments
- Use the newly calculated result for the option you already chose
Determine your remaining monthly or quarterly instalment amounts
From your revised worksheet figures, determine the amount you should pay for each remaining month (or quarter):
- Choose your new instalment base amount for the year (line 1E, 2E, or 3E)
- Subtract the total amount you've already paid in this year's instalments
- Divide the result by the remaining months (or quarters) in the year to find your new payment amounts
If you choose option 1 because it results in lower payments than option 2 or 3, we will charge interest if you underestimate the amount you owe.
Refer to: Instalment interest and penalties
If you are in a situation where instalment interest and penalties may apply, you can overpay your next instalment amounts or pay early to reduce or eliminate instalment interest.
Refer to: Reduce your instalment interest and penalty charges
Example: Recalculating instalments
123 Co. calculated their monthly instalments at the beginning of the tax year. Because they anticipated that their income for the current year would be lower than in previous years, they chose the instalment payments based on the calculation from option 1. They had no tax payable the year before the previous year, so they did not complete option 3.
However, 3 months into the year they realized their income and tax payable for the current year will be significantly higher than they expected.
123 Co. updated worksheets 1 and 2 to recalculate their tax payable for the year.
| Item | Original calculation | Revised calculation |
|---|---|---|
| Option 1 instalment base (line 1E) | $36,000 | $48,000 |
| Option 2 instalment base (line 2E) | $45,000 | $45,000 (no change) |
| Monthly instalment amount using option 1 (line 1F) | $3000 | $4000 |
| Monthly instalment amount using option 2 (line 2F) | $3750 | $3750 (no change) |
Originally, option 1 resulted in the lowest instalment amounts ($3000 per month), so that is what 123 Co. has paid for January, February, and March. Their new calculation shows that option 2 now results in the lowest instalment amount.
123 Co. calculates their remaining instalment requirements as follows:
- Total instalment base for the year (option 2): $45,000
- minus Instalments already paid ($3000 x 3 months): $9000
- equals $36,000
Calculation of remaining monthly instalment payments
- Remaining balance: $36,000
- divided by Remaining months of the year: 9
- equals $4000 per month
However, because the first 3 instalment payments were lower than they needed to be, 123 Co. will need to adjust their future instalment payments to offset the interest that would otherwise be charged at the end of the tax year.
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