MONEY · TAX · Canada
Self-employed: in year two, you pay two years of tax
The year-two cash shock does not come from a bigger tax bill. It comes from the calendar: last year’s balance and this year’s instalments land in the same twelve months.
By the Yoseri News desk · · 6 min read
This article describes the rules of Canada. Income tax, pension plans and tax-sheltered accounts do not transpose from one place to another.
These are not the rules of the region you picked (): this article describes those of Canada. The reasoning holds everywhere; the account names, the caps and the ages do not.
Your first year self-employed went well. You set money aside for tax, you paid your balance on 30 April, you were pleased with yourself.
In year two, you pay twice. And it is not because you earn more.
What a tax instalment is
An employee pays tax with every pay: their employer withholds it at source. Nobody withholds anything from you. So the Canada Revenue Agency asks you to pay in advance, four times a year — those are tax instalments, "payments you make throughout the year to cover the taxes you normally pay in one lump sum on April 30 of the following year".
Four dates, the same for everyone: 15 March, 15 June, 15 September, 15 December.
You owe them when your net tax owing is over $3,000 — $1,800 if you live in Quebec — in the current year and in one of the two preceding ones. That second condition explains everything: your first year cannot meet it.
The calendar, year by year
An assumption, to be replaced with yours: $9,000 of tax owing for 2026, your first full year self-employed.
| When | What | Amount |
|---|---|---|
| All of 2026 | No instalments — first year | $0 |
| 15 March 2027 | Instalment for 2027 | $2,250 |
| 30 April 2027 | Balance for 2026 | $9,000 |
| 15 June 2027 | Instalment for 2027 | $2,250 |
| 15 September 2027 | Instalment for 2027 | $2,250 |
| 15 December 2027 | Instalment for 2027 | $2,250 |
Out of your account in 2026: nothing. In 2027: $18,000. Two years of tax in a single calendar year.
And the worst of it is not the total, it is how concentrated it is. Between 15 March and 30 April 2027 — six weeks — $11,250 leaves you.
Why you do not see it coming
Because nothing warns you at the right moment. The CRA sends an instalment reminder, but it arrives once the obligation already exists — that is, early in year two, while you are still setting money aside for year one’s balance.
Because your first year taught you a false rule: "I pay tax once, at the end". It was true for exactly one year, the one in which the second condition could not be met.
And because the annual figure does not move. Your 2027 tax is about the same as your 2026 tax. Only when it leaves changes — and a budget breaks on the when, not on the how much.
Three things this table does not say
In Quebec there are two calendars. The table above covers the federal side only. Revenu Québec runs its own income tax and its own instalments, with its own thresholds. A self-employed Quebecer therefore gets two sets of reminders, and has to add them up before budgeting.
Instalments are not guesswork. The CRA offers several ways to work them out, one of which simply repeats your previous year. Paying the amount it states shelters you from interest, even if your year ends higher. The $2,250 in the table is an illustration, not your amount.
It is not extra tax. Every instalment paid comes off your final balance: you are not paying the same year twice, you are paying two years during the same year. In 2028 the rhythm settles — $9,000 spread over four dates, and no balance landing all at once.
And for you, what does that mean?
Take last year’s tax balance and divide it by twelve. That is what you set aside monthly at cruising speed. Then, for the first year only, double it: that is what entering the system costs.
Self-employed income varies, and budgeting on its average is the second trap of this working life — our short piece on variable income explains why the floor replaces the average.
Yoseri’s Plan page puts these dates on your calendar and shows what is left between them. The dates are not negotiable; what can be prepared is what sits on them.
Where the figures come from
The maths in this article starts from the assumptions written above. Run them again with your own figures — you should land on the same numbers.
Yoseri News is an educational publication. Nothing in this article is investment advice, a recommendation to buy or sell, or tax advice. Yoseri is registered as neither an adviser nor a dealer with any market authority. The tax rules described here are those of Canada, and the limits change: check your own entitlements before acting.