What Happens If You Pay CRA Late?
Interest, collections and payment arrangements when you can't pay CRA on time.
The short version
- Your 2026 balance is due April 30, 2027. From May 1, CRA charges interest, compounded daily, on whatever is unpaid.
- The rate for October to December 2026 is 7% a year. CRA resets it every quarter.
- There's no separate late-payment penalty for individual income tax. But file late and the late-filing penalty applies too.
- Can't pay it all? Set up a payment arrangement in My Account or by phone. Interest continues, but collection action usually doesn't start while you keep to it.
- Ignore it, and CRA can take money from your bank account, your pay or your refunds without going to court.
What Happens If You Pay CRA Late?
CRA is a patient creditor, as creditors go. It doesn't phone you on day one. It just adds interest every day, quietly, at a rate higher than your savings account pays, and keeps a list. The trouble starts when the list gets long and you've stopped opening the mail.
Here's what late payment actually costs, and how to keep it from turning into collection action.
The Cost: Daily Compound Interest
Interest on unpaid income tax starts May 1 for 2026 balances (the day after the April 30 deadline, even for self-employed people who file by June 15). It's compounded daily at the prescribed rate, which is 7% a year for October 1 to December 31, 2026. CRA sets the rate each quarter.
| Balance owing | Interest after 6 months at 7% | After 12 months |
|---|---|---|
| $2,000 | about $71 | about $145 |
| $10,000 | about $355 | about $725 |
| $30,000 | about $1,066 | about $2,175 |
Estimates at a constant 7% compounded daily; the real rate changes quarterly. Interest isn't deductible, and it's charged on penalties too.
The Other Costs
- Late filing on top: if the return is also late, there's a penalty of 5% plus 1% a month. See filing taxes late. File on time even if you can't pay.
- Instalment interest: if CRA asked for quarterly instalments and you paid late or too little, interest is charged from each missed date. Big shortfalls can add a penalty.
- Refunds and benefits applied to the debt: CRA can keep future refunds and some credit payments to pay the balance.
How much will paying late cost you?
Tell the assistant the balance and when you can pay. It estimates the interest at CRA's current rate and compares a payment arrangement with paying from savings or a line of credit.
Can't Pay in Full? Set Up a Payment Arrangement
The full process is on CRA payment arrangements, and the bigger picture on CRA tax debt.
- File on time. That stops the late-filing penalty, which is the expensive part.
- Pay what you can now. Every dollar paid stops the interest on that dollar.
- Set up a payment arrangement. For personal income tax you can schedule payments yourself in My Account, or use CRA's automated TeleArrangement line (1-866-256-1147). For larger or more complicated debts, call the number on your notice. CRA will want to know what you can afford, based on your income and expenses.
- Keep to it, and file every future return on time. Miss payments without calling first and CRA may move to collection action.
Interest keeps running during an arrangement. If a line of credit costs less than 7%, borrowing to pay CRA can be cheaper. Run the numbers before you decide.
What CRA Can Do If You Don't Pay
After notices and phone calls, CRA's collections officers have powers most creditors only dream about. They can:
- Send a requirement to pay to your bank or employer, taking money from your account or your pay, without a court order.
- Keep your refunds and certain benefit payments.
- Register a lien against property, in serious cases.
Calling early nearly always gets a better result than waiting for the bank to tell you your account is frozen. Our page on CRA tax problems covers collections in more detail.
Can the Interest Be Cancelled?
Sometimes. Under the taxpayer relief provisions (form RC4288), CRA can cancel or waive penalties and interest for circumstances beyond your control (serious illness, a disaster), CRA errors or delays, or a genuine inability to pay, generally for the last ten calendar years. It's discretionary. “I forgot” doesn't qualify; “I was in hospital from March to June” might. See taxpayer relief.
If the balance comes from a reassessment you think is wrong, object as well: for income tax, CRA generally doesn't collect the disputed amount while the objection is open. See notice of reassessment: what to do.
Stop It Happening Again
- Find out why you owed. Two jobs, side income, investments: why do I owe taxes this year has the list and the fixes.
- Self-employed? Move a share of every payment aside the day it arrives. The self-employed tax calculator says how much.
- Know your dates. They're all on Canadian tax deadlines.
- Check the return first. Return Check looks for missed deductions and credits before you file, which is cheaper than a payment plan.
Late Payment Questions
What happens if I pay my taxes late in Canada?
CRA charges interest, compounded daily, on the unpaid balance from May 1 at the prescribed rate (7% for October to December 2026). If your return is also late, a late-filing penalty applies as well.
Is there a penalty for paying taxes late?
For individual income tax there is no separate late-payment penalty, only interest. The late-filing penalty applies if the return itself is late, and instalment interest or penalties can apply if you were required to pay instalments.
Can I set up a payment plan with CRA?
Yes. You can schedule payments in My Account, use the TeleArrangement line at 1-866-256-1147 for personal income tax, or call the number on your notice. Interest continues until the balance is paid.
Can CRA take money from my bank account?
Yes. For an overdue balance, CRA can send a requirement to pay to your bank or employer without a court order. Contacting CRA early to arrange payment usually prevents this.
Can CRA cancel the interest I owe?
Possibly, under the taxpayer relief provisions, for circumstances beyond your control, CRA errors or inability to pay, generally for the last ten calendar years. You apply with form RC4288.
Sources: CRA, Prescribed interest rates, fourth quarter 2026; Arrange to pay your debt over time; Interest and penalties on late taxes; RC4288 Taxpayer Relief. Interest examples calculated by us at a constant 7% compounded daily. Checked October 2026.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.