If you pay an instalment late, interest is charged for each day that your payment is late. The interest rate is currently 5% annual rate, compounded daily. This rate has been basically unchanged since April 2009 (except for one quarter in 2013 when it was 6%). The rate is the base commercial T-Bill rate, rounded up to 1%, plus 4 percentage points. It is adjusted quarterly: see www.cra.gc.ca/interestrates for the current and past rates.
(Personal income tax instalments for March and June are based on two years back, so the CRA can send you a statement in February telling you how much you need to pay to ensure you won’t be charged interest. Your notice for September and December will then tell you how much to pay so that your total instalments for the year equal your last year’s tax.) Normally, refunds owing to you from the CRA bear only minimal interest after 30 days, of 3% for individuals and 1% for corporations.
However, if you pay an instalment early, the CRA will credit you with “offset interest” or “contra interest”, at the same high rate of interest that applies to your late payments. This “offset interest” is offset only against late instalments; it is never paid out to you.
What this means is that, if your total “late payment” interest on instalments matches your total “early payment” offset interest, the two will cancel each other out.
As a result, if you make a single payment at the midpoint of all your instalment obligations for the year, then provided the interest rate does not go down after mid-year (and at the current 5% it cannot go any lower), you will not be assessed any interest.