How UK sick pay is taxed

By PaySlipCheck Editorial · Reviewed by PaySlipCheck Editorial Standards Team · 14 June 2026 · 5 min read

SSP and Occupational Sick Pay in the UK are treated as normal employment income for tax purposes — meaning they're taxed exactly the same way as your regular salary. PAYE Income Tax at your marginal rate + National Insurance are deducted through payroll. Pension contributions continue if you're a member of an auto-enrolled scheme, based on the actual pay received. Long-term absence can trigger tax code changes if total annual earnings drop significantly, potentially reducing your effective tax rate. This guide covers the full tax mechanics, pension impact + long-term absence considerations.

Verified against 2 official sources · Last reviewed 14 June 2026
On this page
  1. PAYE treatment
  2. National Insurance
  3. Pension contributions
  4. Long-term absence + tax code
  5. SSP + Universal Credit
  6. Occupational Health income
  7. Salary sacrifice + sickness
  8. In short

PAYE treatment

Both SSP and OSP are treated as employment income: - Income Tax deducted at your marginal rate - Personal allowance + tax bands apply as normal - Tax code applies as usual (1257L for most)

National Insurance

  • Employee NI applies on sick pay (Class 1)
  • Employer NI at 15% on earnings above £5,000/year
  • Reduced income during sickness may reduce NI liability
  • Weeks with pay below LEL don't count for state pension

Pension contributions

  • Auto-enrolment continues unless you opt out
  • Contribution based on qualifying earnings (£6,240-£50,270)
  • Employer contribution continues per scheme rules
  • Some schemes reduce contributions during long-term absence

Long-term absence + tax code

If sick pay significantly reduces annual earnings: - HMRC may issue revised tax code mid-year - Overpaid tax refunded through payroll (if code updated) or year-end P800 - Personal tax account monitors position

SSP + Universal Credit

Universal Credit + SSP: - SSP counted as earnings for UC calculation - UC may top up income during long absence - Taper: 55p per £1 of earnings above work allowance

Occupational Health income

Income Protection Insurance payments (from employer's group scheme or personal policy): - Employer's group IPI: taxable as employment income - Personal IPI paid from taxed income: benefits usually tax-free - Personal IPI paid from gross salary: benefits taxable

Salary sacrifice + sickness

If you have salary sacrifice arrangements: - Sacrifice continues during OSP - SSP is minimum floor — sacrifice cannot reduce below SSP - Employer may pause sacrifice if it would breach

In short

Sick pay = normal taxable income. PAYE + NI + pension apply. Long absence may prompt tax code adjustment via HMRC.

Frequently asked questions

Is SSP taxable?

Yes — SSP is treated as employment income. PAYE + NI + pension deductions apply as normal.

Do I still pay into my pension while off sick?

Yes — auto-enrolment continues based on actual earnings (SSP + OSP). Employer contribution continues per scheme.

What if my tax code changes during long-term sickness?

HMRC may issue revised code if annual earnings fall. Overpaid tax refunded via payroll or P800 reconciliation.

Does sick pay count for state pension?

Contribution weeks with earnings above Lower Earnings Limit count. SSP-only weeks may still count for NI credits (check with HMRC).

Does income protection insurance replace sick pay?

Group IPI often kicks in after 13 or 26 weeks (deferred period). Personal IPI can start earlier per policy. Both may be taxable depending on premium payment method.

Related calculators

Related guides

More on related topics

  • Attachment of earnings — AEO = court order requiring employer to deduct debt from wages. Protected earnings threshold applies.
  • Auto-enrolment duties — Auto-enrolment = employer duty since 2012. 8% total minimum. Re-enrolment every 3 years.
  • Bank holidays — No statutory right to bank holiday off. Contract decides. 2026 UK has 8 bank holidays.

Related salary breakdowns

Glossary terms used on this page

Quick definitions for the key terms above.

  • PAYE — The UK system through which employers deduct Income Tax and National Insurance from employees' pay before paying it to them.
  • Personal allowance — The amount you can earn each tax year before paying any UK Income Tax — £12,570 in 2026/27, frozen until April 2031.
  • National Insurance — A tax on UK earnings paid by employees, employers and the self-employed, used to fund state benefits and the State Pension.

Sources

All figures on this page are sourced from official UK government publications. We don't cite secondary commentary or other calculator sites.

  1. GOV.UK - Statutory Sick Pay (SSP)
  2. GOV.UK - PAYE: guidance for employers

All tax figures on this page use the same configuration that powers our calculators — see our editorial standards for the review process.

Last reviewed: 14 June 2026. Next review due 14 December 2026.

Disclaimer: This page provides general information based on published HMRC and gov.scot figures. It is not personal tax or financial advice. For your specific situation, please consult a qualified accountant or contact HMRC directly.