The Canada Revenue Agency (CRA) will charge 7% interest on late payments in the third quarter of 2025 — a one-percentage-point drop from 8% in the previous quarter.
The rate charged on overdue tax is set four percentage points higher than the prescribed rate on family loans.
Based on Government of Canada three-month Treasury Bill yields through April, the prescribed interest rate used for loans to family members will be 3% in the third quarter, down from 4% in the second quarter.
The prescribed rate hasn’t been as low as 3% since the last quarter of 2022. It began rising in the third quarter of that year. Up until 2022’s third quarter, the rate had been 1% for two years, with the rate charged on overdue tax at 5%. The prescribed rate hit 6% in the first half of 2024 before beginning to drop.
On Jan. 1, 2025, the CRA began charging 8% interest on overdue taxes, down from 9% in the second half of 2024. The CRA will continue to charge 8% through June 2025.
The CRA charges interest, compounded daily, on overdue taxes. It may also impose penalties — for late filing, for example — as well as interest on the penalties.
Most taxpayers had an April 30 deadline to file their 2024 tax returns and pay any taxes owing. Self-employed taxpayers have a deadline of June 15, although taxes owing were due April 30.
Individual taxpayers reporting capital gains on their 2024 returns have an extended tax-filing deadline of June 2, because of the Jan. 31, 2025, deferral of the now-defunct proposed increase to the capital gains inclusion rate. This deadline includes T1 filers who have T3 tax slips reporting capital gains (the extended deadline generally doesn’t include these taxpayers’ spouses). Trusts reporting capital gains have until May 1 — today — to file.
Prescribed-rate calculation
The lower the prescribed rate, the greater the potential for income splitting using a prescribed-rate loan strategy. The prescribed rate is calculated every quarter.
According to Section 4301 of the Income Tax Regulations, the prescribed rate is based on the average yield of Government of Canada three-month Treasury Bills auctioned in the first month of the preceding quarter, rounded up to the next whole percentage.
The auction yield for three-month T-Bills was 2.59% on April 8 and 2.65% on April 22. As the average of those yields is 2.62%, the prescribed rate will be 3% for the third quarter of 2025.