Perhaps they are not telling the truth - tax has to be paid by 31st Jan, but the PLR payment doesn't come through until February. But let's assume they are, since we should take people at their word unless we have good reason not to. (Probably all the disasters in my life stem from that naive principle - no matter.)
[Note for non-UK readers: In the UK, income tax on self-employed earnings is paid in January. You have to work out what you owe on the previous year's earnings, and pay half in advance for the coming year, on the assumption that you will earn the same. You can adjust this guess if you think your earnings will be different. You pay the second half of the estimate in July. The following January, what you've already paid is deducted from what you owe. If you earn the same every year, you effectively pay half in January and half in July. If your income increases, you pay extra in January as there's a catch-up payment.]
What's so wrong with using PLR to pay your tax? Two things - firstly, it's unpredictable. You never know how much your will get. It's worked out by tracking loans at a sample of libraries and extrapolating. Much more importantly, though, you shouldn't have to! Why ON EARTH are these writers not setting aside the tax on their earnings as they get paid? It is the ONLY sensible way to be a self-employed person. You put the tax in a deposit account and you don't touch it, NO MATTER WHAT.
Some authors have other jobs, and their personal allowance (the amount you can earn without paying tax) is used up on their employed earnings. So they need to set aside 22% (or 40%, depending on their income level) of their income from writing. That's really easy - no hard sums at all. Those of us who earn only from writing have a rather more complex calculation to do, but you can create a spreadsheet to work it out for you, and as a guideline if you set aside 25% of everything (so ignore the personal allowance) you will have about enough. If you expect to be paying higher rate tax, set aside 30-33% of everything, depending on how far over the 40% threshold you expect to go.
Yes, you have expenses to deduct - don't worry about it. You also have NI to pay. You might get some money left over in your tax account at the end - and the first time you can use that to make the advance payment. After a few years, you can afford to take out some of the excess and spend it. But not immediately.
And finally - the figures don't work. The amount of PLR you can earn is capped at £6,600, and this year (2010-11), 263 authors earned the maximum. Now, if you're earning £6,600 in PLR you are earning a lot from your books - your tax bill is going to be a LOT more than £6,600. Actually, it would be interesting to compare tax bills and PLR income: ignoring payments on account, my PLR this year is around an eighth of my tax liability - so it wouldn't be a lot of help. Most PLR payments (nearly 15,000 out of a total of 23,000) are for under £50, so that's not going to go far in anyone's tax bill. I assume, though, that these trifling payments aren't going to professional authors but to people who've written the odd one or two books, probably some time ago, and maybe on obscure topics.
Authors manage to look unprofessional enough - let's not look extra-unprofessional by screwing up our tax accounts, or even pretending to. It's not cool to adopt an 'I can't deal with accounts' pose, it just makes you look incompetent. If I were a publisher, I'd be wary of commissioning someone who doesn't have the sense to set their tax aside - they probably won't take deadlines seriously either. After all, tax doesn't come as a surprise! It's not as though you just landed on Go to Jail - you always knew it was coming. And while flights of fancy and working outside the rules may be essential to your creative work, there's a lot of uncreative work involved in being a professional writer, and you need your feet on the ground for that part.
OK, rant over. You can all rant back at me now :-)