It’s official: The prescribed rate on loans to family members will remain at 3% in the fourth quarter of 2025, while the interest rate Canadians must pay on overdue tax will stay at 7%. In the first half of the year, those rates were 4% and 8%, respectively.
The Canada Revenue Agency (CRA) published the prescribed annual interest rates for amounts owed to or by the agency for the period from Oct. 1 to Dec. 31 on Thursday.
Before the third quarter of 2025, the prescribed rate hadn’t been as low as 3% since late 2022. The rate began climbing in the third quarter of that year after sitting at 1% for two years, with overdue tax charged at 5%. It peaked at 6% in early 2024 before starting to decline.
The rate the CRA charges on overdue tax, Canada Pension Plan contributions and employment insurance premiums is always four percentage points higher than the prescribed rate.
The prescribed rate is based on the average of three-month Treasury bills for the first month of the preceding quarter, rounded up to the next highest percentage point.
Prescribed-rate loans are often used for income splitting with a spouse, common-law partner or other family members. A loan can be made directly to an individual or to a family trust, which can then distribute income to members in lower tax brackets. The lower the prescribed rate, the greater the tax-planning opportunity.
Other key CRA announcements for Q4 2025 include:
- the rate to be paid on corporate taxpayer overpayments will be 3%;
- the rate to be paid on non-corporate taxpayer overpayments will be 5%;
- the rate used to calculate taxable benefits for employees and shareholders from interest‑free and low-interest loans will be 3%; and
- the rate for corporate taxpayers’ pertinent loans or indebtedness will be 6.69%, up from 6.62% in Q3.
The full list of CRA’s prescribed interest rates is at canada.ca.