The biggest tax shock for many Pilates instructors usually comes in the second year of trading, when HMRC asks for something called payments on account.

If you do not plan properly, this can feel like your tax bill has doubled overnight. In reality, HMRC is asking for the tax you owe plus advance payments towards the next bill.

What Are Payments on Account?

Payments on account are advance payments towards your next Self Assessment tax bill. If your tax bill is more than £1,000 and an exception does not apply, HMRC usually requires two payments on account.

This can mean you need to:

  • Pay your current year tax
  • Pay 50 percent towards next year's estimated bill in January
  • Pay the remaining 50 percent towards next year's estimated bill in July

HMRC explains the official rules in its guide to payments on account.

The January payment can feel brutal. You may owe your full tax bill for the previous year plus the first payment on account for the next year at the same time.

Example: How Instructors Get Caught Out

Imagine your first profitable year as a Pilates instructor looks like this:

  • Year 1 profit: £30,000
  • Tax and National Insurance due: roughly £5,000

In January, HMRC may ask for:

  • £5,000 for Year 1
  • £2,500 as the first payment on account

Total due in January: £7,500. Then another £2,500 may be due in July.

If your income is seasonal or inconsistent, this timing can create serious cash flow pressure, especially if you have not been setting money aside throughout the year.

Why Pilates Instructors Are Vulnerable

Pilates income is rarely perfectly consistent. You may have strong months, quiet months and irregular spikes from workshops or private clients.

Your income may include:

  • Seasonal dips
  • January surges
  • Workshop spikes
  • Retreat income paid in blocks
  • Irregular 1:1 bookings
  • Online programme launches

Without forecasting, tax money can be absorbed into rent, living costs, equipment, software and everyday expenses before the tax deadline arrives.

1. Set Aside Tax Monthly

A structured approach is to transfer 25 to 30 percent of profit into a separate tax account every month.

The important word is profit, not income. If you set aside a percentage of income without understanding your costs, you may over-save in some months and under-save in others.

This requires accurate bookkeeping. You need to know how much you earned, what you spent and what profit is actually building up.

2. Forecast Profit Quarterly

Instead of waiting until January, review your numbers every quarter.

Ask yourself:

  • What is my projected annual profit?
  • Is profit increasing significantly?
  • Am I approaching a higher tax band?
  • Will payments on account rise next year?
  • Do I need to adjust what I am setting aside?

If profit rises sharply, payments on account can also rise. Quarterly forecasting gives you time to react before the bill lands.

3. Consider the Timing of Large Expenses

If you are planning to buy high-value business assets, timing can affect taxable profit and cash flow.

This may include:

  • Reformers
  • Studio fit-out equipment
  • High-value cameras for online classes
  • Lighting, microphones and recording equipment
  • Computer equipment or editing software

The timing and tax treatment of larger purchases can affect when tax relief is available. Strategic planning can help smooth tax liabilities rather than creating unnecessary spikes.

For more detail on deductible costs, read our guide to expenses Pilates instructors can claim.

Making Tax Digital

Making Tax Digital for Income Tax is being phased in for sole traders and landlords with qualifying income above set thresholds. It means keeping digital records and sending quarterly updates to HMRC using compatible software.

For Pilates instructors with multiple income streams, this makes accurate systems essential. Classes, workshops, retreats, online programmes and private sessions all need to be recorded clearly.

You can read HMRC's latest guidance on Making Tax Digital for Income Tax. Our Making Tax Digital service can also help you prepare.

When Tax Planning Becomes Essential

You should move from reactive accounting to proactive planning when the business becomes more complex.

This is especially important if:

  • Your profit exceeds £40,000
  • You are close to VAT registration
  • You are launching online programmes
  • You are hiring subcontractors
  • You are considering a limited company
  • You are opening a studio or taking on premises

At this stage, small planning decisions can save money, protect cash flow and prevent unpleasant surprises.

The Real Goal

Advanced tax planning is not about avoiding tax. It is about running the business with more control.

Good planning helps with:

  • Removing uncertainty
  • Protecting cash flow
  • Planning growth confidently
  • Avoiding stress in January
  • Understanding when VAT or limited company planning becomes relevant

For Pilates instructors building a long-term business, proper accounting support becomes an investment rather than a cost. If you want help forecasting tax, tracking profit and preparing for payments on account, see our Pilates instructor accountant page.

Further reading