Corporate Tax and HST Set-Aside Calculator
The HST you collected was never yours and the corporate tax is coming whether you saved for it or not. Work out one percentage to move off every deposit, and what your balance owing will be at year end.
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What You Will Owe
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The Set-Aside
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Deadlines You Are Saving For
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Points That Decide This
What to Do Next
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Disclaimer: Corporate tax is applied here at the Ontario combined rate of 12.2% on active business income within the $500,000 small business limit and 26.5% above it. HST is applied at the Ontario rate of 13%. Under the regular method, net tax is the tax collected on taxable supplies less input tax credits on eligible purchases. The quick method allows an eligible registrant to remit a prescribed percentage of tax-included revenue instead of tracking most input tax credits, with a credit on the first $30,000 of eligible supplies in a fiscal year; eligibility is generally limited to registrants whose annual taxable supplies including those of associates do not exceed the prescribed threshold, an election is required, and certain businesses including most listed financial institutions and some professionals are excluded. The quick method remittance rate varies with the type of business and the province, and the illustrative rate used here should be confirmed for the specific business before electing. The balance of corporate tax is generally due two months after the tax year end, extended to three months for a CCPC meeting the conditions in subsection 157(1.1), while the T2 return itself is due six months after year end. Corporate instalments are generally required where tax payable for the current or previous year exceeds $3,000, with eligible CCPCs able to remit quarterly rather than monthly. GST/HST for an annual filer is generally due three months after the fiscal year end, and annual filers with net tax above the prescribed threshold may be required to make instalments. Figures here are indicative planning estimates based on the information entered and are not a substitute for a prepared return. This page is general information, not tax advice.
The HST Was Never Your Money
This is the part that catches new incorporated owners hardest. A client pays an invoice for eleven thousand three hundred dollars. Ten thousand of that is yours. One thousand three hundred belongs to the Crown and you are holding it.
It lands in the same account as everything else, it spends like everything else, and eleven months later the return comes due and the money is gone.
Amounts collected as HST are held in trust. Directors can be personally liable under section 323 of the Excise Tax Act, and that liability survives the corporation. Spending collected HST during a slow month is the single most dangerous cash flow habit an owner-managed business can develop.
One Percentage, One Account
The system that works is boring. Open a second bank account. Every time money lands, move a fixed percentage into it. Never spend from it.
What defeats most people is trying to calculate the right amount each time. There is no right amount each time. There is one percentage that is close enough, applied without thinking, and reviewed once a quarter.
| Approach | Outcome |
|---|---|
| One account, calculate at year end | The money is gone |
| Separate account, variable amounts when you remember | Better, still short |
| Separate account, fixed percentage every deposit | Works |
Round the percentage up, never down. Being over-reserved at year end is a pleasant surprise and a cash cushion. Being under-reserved is a payment arrangement with collections. The asymmetry is not close, so pick the higher number.
Annual HST Filing Is a Trap for the Undisciplined
Annual filing is administratively lighter and it concentrates the entire year’s HST into one payment. For a business that has not been reserving, that is the moment everything falls apart.
Quarterly filing is more paperwork and it forces the discipline. For an owner who knows they struggle with this, quarterly is genuinely worth choosing even though the annual option is available.
The Quick Method Suits Some Businesses Well
Rather than tracking input tax credits, an eligible registrant can remit a prescribed percentage of tax-included revenue. For a service business with few taxable purchases, that often produces less remittance than the regular method and far less bookkeeping.
It is not for everyone. A business with substantial taxable expenses generally does better under the regular method, and there are eligibility limits, an election to make, and excluded categories. It is worth modelling both rather than assuming.
- Good fit: consultants, trades with low material costs, service businesses
- Poor fit: retailers, businesses buying substantial equipment or inventory
- Not available to certain businesses, including most listed financial institutions
- Requires an election and eligibility depends on your taxable supplies
Instalments Arrive in Year Two
The first year of a corporation usually has no instalments. Then tax payable crosses three thousand dollars and the following year you are paying quarterly.
That is a cash flow change owners rarely anticipate, because the first year taught them the balance is due once and the second year does not work that way. It is worth building into the reserve before the first instalment notice arrives.
Dividends do not reduce corporate tax. Salary is deductible to the corporation and dividends are not. An owner planning to take forty thousand as dividends is taking it after the corporation has paid tax on the profit, and the set-aside has to cover that tax first.
What the Percentage Actually Covers
Two separate obligations sitting in one reserve. The HST, which is money you collected and are holding. The corporate tax, which is a real cost against your profit.
Keeping them in one account is fine practically. Understanding they are different matters, because the HST is not a tax on your business at all, it is a tax on your customer that you agreed to collect.
Payroll Changes the Picture
Where you have staff or pay yourself a salary, source deductions are a third obligation and they are the most urgent of all. They are trust funds, they are due monthly, and the penalties for missing them start at three percent and rise to ten.
Those should never sit in a reserve waiting for a deadline. They should be remitted on the schedule and treated as untouchable.
What This Calculator Does Not Cover
- Your personal tax on the salary or dividends you take
- Payroll source deductions, which have their own schedule
- Whether the quick method is right for your specific business
- Capital purchases and the credits or deductions they generate
- Losses carried forward from an earlier year
- Provinces other than Ontario
The percentage matters less than moving it automatically. Our tax planning service covers the reserve, the instalment schedule and whether the quick method suits your business.
Frequently Asked Questions
Common questions on setting money aside for tax.
Related Calculators and Guides
More tools for managing the tax bill.
Set It Up Once and Stop Worrying About It
Send us last year’s figures and we will set the percentage, build the deadline calendar, tell you whether the quick method suits you, and take over the filings so the dates are not your problem.