How to Lower or Stop CRA Tax Instalments After an Income Change

CRA tax instalments can be reduced or stopped when income drops, but you must update your estimate and ask the CRA to recalculate.

By Promissory.ca Editorial Team Reviewed against official Canadian sources Last updated: 2026-09-16

Tax instalments are quarterly prepayments of income tax. The Canada Revenue Agency (CRA) generally expects them when your net tax owing is above a set threshold for the current tax year and either of the two prior years. The threshold is $3,000, or $1,800 in Quebec. If your income falls, your net tax owing may fall below that threshold, which can reduce or stop the requirement. The challenge is that CRA reminders are often based on older returns and may not reflect a recent job loss, retirement, business slowdown, or other income change.

Why CRA tax instalments may no longer match your situation

Instalments are not a fixed tax. They are a collection mechanism. CRA uses information from assessed returns to estimate how much tax you may owe for the current year. When your income changes, that estimate can become stale. For example, a person who had a high-income year from a bonus, severance, capital gain, or business sale may receive reminders even after returning to a lower income. Similarly, a retiree who stops employment income but has not yet filed a full return showing the change may still see reminders based on past employment.

CRA does not automatically know about every change at the moment it happens. Some income sources report to CRA, but timing varies. Until your return is assessed, the instalment system may continue using older data. That is why the onus is generally on you to review your expected net tax owing and ask for a recalculation when your situation has changed.

How to tell whether you can reduce or stop tax instalments

Begin with a realistic estimate of your net tax owing for the current tax year. Net tax owing is broadly the amount of tax you will owe after subtracting tax withheld at source and certain credits. Include all expected income: employment, self-employment, pension, EI benefits, investment income, rental income, and taxable capital gains. Then subtract expected tax withheld from salary, pension, or other payments, and any credits you expect to claim. The result is an estimate of your net tax owing.

Compare that estimate with the instalment threshold. If you expect net tax owing to be $3,000 or less, or $1,800 or less in Quebec, you may be able to reduce or stop instalments for the current tax year. However, the threshold test looks at the current year and either of the two prior years. This means a past high-income year can still trigger an instalment requirement even if the current year looks lower. In that case, a reduction or cancellation request is often the practical solution.

Compare the CRA instalment calculation options

The current-year option is not a free pass. If your estimate is too low, CRA may charge instalment interest, and a penalty may apply in some cases. If your estimate is too high, you may overpay and need to wait for a refund or request a transfer. The goal is a reasonable estimate supported by documents.

Steps to request lower or stopped tax instalments

1. Estimate your net tax owing for the current tax year using all expected income and withholding.
2. Compare the estimate with the threshold: $3,000, or $1,800 in Quebec.
3. Gather supporting records, such as pay stubs, pension statements, EI benefit statements, business projections, or a record of reduced income.
4. Contact CRA through your CRA account, by mail, or by phone. Ask for a recalculation, reduction, or cancellation of instalments if your estimate supports it.
5. Review any revised remittance slips and pay the revised amounts by the due dates.
6. Recheck after your return is assessed. If net tax owing is below the threshold, future instalment reminders may stop. If it is higher, adjust your payments.

If CRA does not reduce the amount immediately, you still need to decide what to pay. Paying less than CRA asks can lead to interest if your estimate turns out to be wrong. Paying the full amount can preserve cash flow predictability but may mean overpaying temporarily. A common middle ground is to pay based on your documented current-year estimate and monitor the account closely.

When lowering or stopping tax instalments may be risky

An income change does not always mean a lower tax bill. Your net tax owing can stay high or rise even if gross income falls. For example, you may lose access to certain credits, face recapture of benefits, or realize a large capital gain later in the year. If you stop instalments based on a temporary drop and then receive a large payment, bonus, or investment gain, the underpayment can create interest and penalties.

Tax withheld at source is another factor. If you have employment or pension income, you can usually ask the payer to withhold additional tax. That withholding reduces your net tax owing and may keep you below the instalment threshold. For self-employed income, there is no automatic withholding, so quarterly planning matters more. Farmers and fishers have a single instalment due date of 31 December, which can make cash-flow planning different from the standard quarterly schedule.

Common income changes that justify a review

• Job loss, reduced hours, temporary layoff, or unpaid leave.
• Retirement, pension commencement, or a shift from employment to pension income.
• Parental, disability, or caregiving leave with lower income.
• A decline in self-employment, freelance, or business income.
• Loss of rental income after a property sale or vacancy.
• Lower investment income, or a change in expected capital gains.
• Separation, marriage, or a change in dependants that affects credits and benefits.
• A one-time income event in a prior year that will not repeat.

Due dates and payment mechanics for tax instalments

CRA individual tax instalments are generally due on 15 March, 15 June, 15 September, and 15 December. Farmers and fishers have a single due date of 31 December. Missing a due date can trigger interest, even if you later reduce the amount with CRA’s agreement.

You can pay through your financial institution, online banking, or another CRA-approved method. Always use the correct remittance voucher or account information. If you request a reduction, confirm that your CRA account reflects the new amount before the next due date. Keep copies of your estimate, correspondence, and payment confirmations. Good records help if CRA later questions the reduction.

What to do if CRA disagrees with your estimate

CRA may review your request and decide that instalments should continue at a higher amount. That does not necessarily mean you must pay that exact amount, but it does mean you bear the risk if your lower estimate is wrong. If you have solid documentation, you can explain the income change again. If the disagreement continues, you may choose to pay the CRA amount to avoid interest, or pay your estimate and set aside funds for a potential interest charge.

After you file your return, the actual net tax owing becomes clearer. If it is below the threshold, CRA should adjust future instalment requirements. If it is above, you may need to resume payments or increase them. Reviewing your instalment situation after filing is a practical habit, especially after a year with unusual income.

Reducing tax instalments without creating a new problem

The safest approach is to reduce instalments only to the level supported by a reasonable current-year estimate. Do not stop payments simply because a single paycheque or contract ended. Account for severance, EI, pension splitting, RRSP deductions, and other factors that affect net tax owing. If you are unsure, paying a higher amount can be less costly than underpaying and facing interest. If you overpay, you can generally apply the amount to another tax debt or request a refund.

For anyone with variable income, a mid-year review is useful. Update your estimate after major changes, such as a new job, retirement, or a large business loss. If your income recovers, increase payments before the next due date. This flexible approach can keep instalments aligned with reality without repeatedly stopping and restarting them.