The water content of the topsoil is one of the key factors controlling biogeochemical processes, greenhouse gas emissions and biosphere - atmosphere interactions in many ecosystems, particularly in northern peatlands. In these wetland ecosystems, the water content of the photosynthetic active peatmoss layer is crucial for ecosystem functioning and carbon sequestration, and is sensitive to future shifts in rainfall and drought characteristics. Current peatland models differ in the degree in which hydrological feedbacks are included, but how this affects peatmoss drought projections is unknown. The aim of this paper was to systematically test whether the level of hydrological detail in models could bias projections of water content and drought stress for peatmoss in northern peatlands using downscaled projections for rainfall and potential evapotranspiration in the current (1991-2020) and future climate (2061-2090). We considered four model variants that either include or exclude moss (rain)water storage and peat volume change, as these are two central processes in the hydrological self-regulation of peatmoss carpets. Model performance was validated using field data of a peatland in northern Sweden. Including moss water storage as well as peat volume change resulted in a significant improvement of model performance, despite the extra parameters added. The best performance was achieved if both processes were included. Including moss water storage and peat volume change consistently reduced projected peatmoss drought frequency with >50%, relative to the model excluding both processes. Projected peatmoss drought frequency in the growing season was 17% smaller under future climate than current climate, but was unaffected by including the hydrological self-regulating processes. Our results suggest that ignoring these two fine-scale processes important in hydrological self-regulation of northern peatlands will have large consequences for projected climate change impact on ecosystem processes related to topsoil water content, such as greenhouse gas emissions.