What interest rate does the CRA charge on overdue taxes right now?
As of October 2026, the CRA charges 7% a year on overdue taxes, CPP contributions and EI premiums for the quarter from October 1 to December 31, 2026. The rate is the prescribed base rate (3%) plus 4 points, compounded daily. The CRA sets it quarterly, and it has held at 7% since July 2025.
The rates for October 1 to December 31, 2026
The CRA's fourth quarter rates run from October 1 to December 31, 2026 canada.ca. Your client pays 7% on anything overdue. The CRA pays your client 3% or 5% on an overpayment, depending on whether the client is a corporation.
| Rate, Q4 2026 | Annual rate |
|---|---|
| Overdue taxes, CPP contributions and EI premiums | 7% |
| Overpayments to corporations | 3% |
| Overpayments to taxpayers other than corporations | 5% |
| Taxable benefit on low interest or interest free employee and shareholder loans | 3% |
| Pertinent loans or indebtedness of corporations | 6.29% |
The same 7% applies to overdue GST/HST, the fuel charge, the Underused Housing Tax and the Luxury Tax, and the same 3% and 5% apply when those amounts are overpaid canada.ca. So a client behind on both income tax and GST/HST is paying one rate on both balances.
Every quarter since April 2025
The CRA sets these rates each quarter and posts one page per quarter canada.ca. The overdue rate dropped from 8% to 7% on July 1, 2025 and has not moved since. Some secondary sites list 6% for early 2026; the CRA's own pages for those quarters say 7%.
| Quarter | Dates | Overdue tax, CPP, EI | Overpaid, corporation | Overpaid, other taxpayers | Prescribed base rate |
|---|---|---|---|---|---|
| Q4 2026 | Oct 1 to Dec 31, 2026 | 7% | 3% | 5% | 3% |
| Q3 2026 | Jul 1 to Sep 30, 2026 | 7% | 3% | 5% | 3% |
| Q2 2026 | Apr 1 to Jun 30, 2026 | 7% | 3% | 5% | 3% |
| Q1 2026 | Jan 1 to Mar 31, 2026 | 7% | 3% | 5% | 3% |
| Q4 2025 | Oct 1 to Dec 31, 2025 | 7% | 3% | 5% | 3% |
| Q3 2025 | Jul 1 to Sep 30, 2025 | 7% | 3% | 5% | 3% |
| Q2 2025 | Apr 1 to Jun 30, 2025 | 8% | 4% | 6% | 4% |
Each row comes from that quarter's CRA page: canada.ca,
canada.ca,
canada.ca,
canada.ca,
canada.ca and
canada.ca. The base rate column is the rate the CRA uses for the taxable benefit on employee and shareholder loans. The full prescribed rate picture, including that loan rate, is on our 2026 prescribed rates page.
How the rate is set: base rate plus 4 points
Section 4301 of the Income Tax Regulations builds every one of these rates from one base rate. The base rate is the average yield on three month Government of Canada Treasury bills sold in the first month of the previous quarter, rounded up to the next whole percent laws-lois.justice.gc.ca.
| Who pays whom | Formula under Reg 4301 | Q4 2026 |
|---|---|---|
| Your client owes the CRA | Base rate plus 4 points | 3% + 4 = 7% |
| The CRA owes a corporation | Base rate plus 0 | 3% + 0 = 3% |
| The CRA owes any other taxpayer | Base rate plus 2 points | 3% + 2 = 5% |
The 4 point spread is fixed in the regulation, so the overdue rate only moves when the Treasury bill average crosses a whole percent. Section 161(1) of the Income Tax Act is what charges it: interest at the prescribed rate on unpaid tax for as long as the balance stays outstanding laws-lois.justice.gc.ca. Subsection 248(11) then compounds it daily, including interest that is itself unpaid
laws-lois.justice.gc.ca.
Worked example: $20,000 owing from May 1 to December 31, 2026
Your client's 2025 T1 was due April 30, 2026, and they still owe $20,000. Interest starts the day after the due date, so it runs from May 1 canada.ca. Every day from May 1 to December 31 falls in a 7% quarter, so the rate stays flat for all 245 days.
The daily factor is 7% divided by 365, about 0.0192% a day. On day one that adds $3.84. After that, each day's interest is charged on the balance plus all earlier interest.
| Month end, 2026 | Days of interest | Balance with interest |
|---|---|---|
| May 31 | 31 | $20,119.25 |
| June 30 | 61 | $20,235.32 |
| July 31 | 92 | $20,355.97 |
| August 31 | 123 | $20,477.34 |
| September 30 | 153 | $20,595.49 |
| October 31 | 184 | $20,718.28 |
| November 30 | 214 | $20,837.82 |
| December 31 | 245 | $20,962.06 |
By December 31 the interest is $962.06. Simple interest at 7% over the same 245 days would be $939.73, so daily compounding adds $22.33. Over a full year at 7%, daily compounding works out to an effective rate of about 7.25%. Treat these as estimates: the CRA statement is the figure your client actually owes, and it can differ by a few cents from this arithmetic.
If the balance had stayed unpaid through a quarter where the rate changed, you would apply each quarter's rate to the days in that quarter and keep compounding from the running balance.
What the rate applies to, and the traps
Penalties earn interest too. Subsection 161(11) charges interest at the prescribed rate on a penalty, and for a late filing penalty under section 162 it runs from the day the return was due, not from the date of the assessment laws-lois.justice.gc.ca. On a late T1 the 5% plus 1% a month penalty
canada.ca starts compounding at 7% straight away
laws-lois.justice.gc.ca. For corporate returns, see the T2 late filing penalty.
Late payroll remittances attract the same 7%, because the CRA lists CPP contributions and EI premiums beside overdue taxes. Interest runs from the day each remittance was due, so check the remittance due dates for their remitter type.
Short or late instalments are a separate charge with their own calculation, covered on instalment interest. The interest itself is not deductible: paragraph 18(1)(t) bars a deduction for any amount paid or payable under the Income Tax Act laws-lois.justice.gc.ca.
Sources
What rate does the CRA pay on a refund in Q4 2026?
It pays 3% to a corporation and 5% to any other taxpayer from October 1 to December 31, 2026 canada.ca. Both are the 3% base rate, plus 2 points for taxpayers that aren't corporations.
Can the CRA cancel the interest on my client's balance?
Yes, under the taxpayer relief rules, when events beyond your client's control kept them from paying canada.ca. Subsection 220(3.1) lets the CRA waive interest only for a request made within ten calendar years after the end of the tax year involved
laws-lois.justice.gc.ca.
Does interest stop once the CRA issues a notice of assessment?
No. Interest under section 161 keeps running for as long as the balance is outstanding, and subsection 248(11) compounds it daily until it is paid laws-lois.justice.gc.ca. Paying the balance stops it, and a relief decision can cancel what has already built up.
Is the overdue rate going to change in January 2027?
The first quarter 2027 rate isn't published yet as of October 2026. Each 2026 quarter was posted more than a month ahead (the fourth quarter page is dated August 28, 2026) canada.ca, and the overdue rate will stay at 7% unless the Treasury bill average moves the base rate off 3%.
General information for the tax year shown, not advice for a specific client. Confirm the facts before you file or remit.