diff --git a/app/service/rest.py b/app/service/rest.py
index 09ef7f27e..03d111be9 100644
--- a/app/service/rest.py
+++ b/app/service/rest.py
@@ -4,12 +4,13 @@ from datetime import datetime
 from flask import Blueprint, current_app, jsonify, request
 from notifications_utils.letter_timings import letter_can_be_cancelled
 from notifications_utils.timezones import convert_utc_to_bst
-from sqlalchemy.exc import IntegrityError
+from sqlalchemy.exc import IntegrityError, SQLAlchemyError
 from sqlalchemy.orm.exc import NoResultFound
 
 from app.aws import s3
 from app.config import QueueNames
 from app.dao import fact_notification_status_dao, notifications_dao
+from app.dao.annual_billing_dao import set_default_free_allowance_for_service
 from app.dao.api_key_dao import (
     expire_api_key,
     get_model_api_keys,
@@ -255,6 +256,17 @@ def create_service():
 
     dao_create_service(valid_service, user)
 
+    # Need to do the annual billing update in a separate transaction because the both the
+    # dao_add_service_to_organisation and set_default_free_allowance_for_service are wrapped in a transaction.
+    # Catch and report an error if the annual billing doesn't happen - but don't rollback the service update.
+    try:
+        set_default_free_allowance_for_service(valid_service, year_start=None)
+    except SQLAlchemyError:
+        # No need to worry about key errors because service.organisation_type has a foreign key to organisation_types
+        current_app.logger.exception(
+            f"Exception caught when trying to insert annual billing creating a service {valid_service.id} "
+            f"for organisation_type {valid_service.organisation_type}")
+
     return jsonify(data=service_schema.dump(valid_service).data), 201
 
 
diff --git a/tests/app/organisation/test_rest.py b/tests/app/organisation/test_rest.py
index 02889e574..5b2def4e4 100644
--- a/tests/app/organisation/test_rest.py
+++ b/tests/app/organisation/test_rest.py
@@ -585,7 +585,7 @@ def test_post_link_service_to_organisation_missing_payload(
 def test_link_service_to_organisation_updates_service_if_annual_billing_update_fails(
         mocker, admin_request, sample_service, sample_organisation
 ):
-    mocker.patch('app.dao.annual_billing_dao.set_default_free_allowance_for_service', raises=SQLAlchemyError)
+    mocker.patch('app.organisation.rest.set_default_free_allowance_for_service', raises=SQLAlchemyError)
     data = {
         'service_id': str(sample_service.id)
     }
@@ -596,6 +596,7 @@ def test_link_service_to_organisation_updates_service_if_annual_billing_update_f
         _expected_status=204
     )
     assert sample_service.organisation_id == sample_organisation.id
+    assert len(AnnualBilling.query.all()) == 0
 
 
 def test_rest_get_organisation_services(
diff --git a/tests/app/service/test_rest.py b/tests/app/service/test_rest.py
index 1878befb0..6e2599a45 100644
--- a/tests/app/service/test_rest.py
+++ b/tests/app/service/test_rest.py
@@ -6,6 +6,7 @@ from unittest.mock import ANY
 import pytest
 from flask import current_app, url_for
 from freezegun import freeze_time
+from sqlalchemy.exc import SQLAlchemyError
 
 from app.dao.organisation_dao import dao_add_service_to_organisation
 from app.dao.service_sms_sender_dao import dao_get_sms_senders_by_service_id
@@ -31,6 +32,7 @@ from app.models import (
     SERVICE_PERMISSION_TYPES,
     SMS_TYPE,
     UPLOAD_LETTERS,
+    AnnualBilling,
     EmailBranding,
     InboundNumber,
     Notification,
@@ -482,6 +484,46 @@ def test_create_service_with_domain_sets_organisation(
         assert json_resp['data']['organisation'] is None
 
 
+def test_create_service_should_create_annual_billing_for_service(
+    admin_request, sample_user
+):
+    data = {
+        'name': 'created service',
+        'user_id': str(sample_user.id),
+        'message_limit': 1000,
+        'restricted': False,
+        'active': False,
+        'email_from': 'created.service',
+        'created_by': str(sample_user.id)
+    }
+    assert len(AnnualBilling.query.all()) == 0
+    admin_request.post('service.create_service', _data=data, _expected_status=201)
+
+    annual_billing = AnnualBilling.query.all()
+    assert len(annual_billing) == 1
+
+
+def test_create_service_should_create_service_if_annual_billing_query_fails(
+    admin_request, sample_user, mocker
+):
+    mocker.patch('app.service.rest.set_default_free_allowance_for_service', raises=SQLAlchemyError)
+    data = {
+        'name': 'created service',
+        'user_id': str(sample_user.id),
+        'message_limit': 1000,
+        'restricted': False,
+        'active': False,
+        'email_from': 'created.service',
+        'created_by': str(sample_user.id)
+    }
+    assert len(AnnualBilling.query.all()) == 0
+    admin_request.post('service.create_service', _data=data, _expected_status=201)
+
+    annual_billing = AnnualBilling.query.all()
+    assert len(annual_billing) == 0
+    assert len(Service.query.filter(Service.name == 'created service').all()) == 1
+
+
 def test_create_service_inherits_branding_from_organisation(
     admin_request,
     sample_user,