Yes, you do pay tax on SSP. Statutory Sick Pay is treated as earned income, so your employer deducts Income Tax and Class 1 National Insurance through PAYE before the money reaches you, exactly as they would with your normal wages.1GOV.UK. Statutory Sick Pay – What You’ll Get Whether you actually end up owing tax over the year is a different question, and it depends on whether your total income crosses the £12,570 Personal Allowance.
Why SSP Counts as Taxable Income
SSP is designed to replace wages, and HMRC taxes it on that basis. When your employer pays SSP, it falls under employment income rules in the Income Tax (Earnings and Pensions) Act 2003. In the rarer situation where HMRC pays SSP directly, Section 660 of the same Act keeps it taxable, just reclassified as social security income.2HM Revenue & Customs. Employment Income Manual – EIM76350 Either way, both Income Tax and National Insurance come off before you see the payment.
How the Tax Is Taken
Your employer handles the deductions through PAYE, using your tax code to work out how much Income Tax and National Insurance to withhold from each SSP payment.1GOV.UK. Statutory Sick Pay – What You’ll Get The figure that arrives in your account is the net amount. You don’t need to file anything or notify HMRC separately. The one thing worth checking is your tax code, since an out-of-date code can cause too much or too little to be taken.
When You Might Not Actually Owe Tax
The standard Personal Allowance is £12,570 for the current tax year, so you can earn up to that amount before Income Tax kicks in.3GOV.UK. Income Tax Rates and Personal Allowances If your combined wages and SSP for the year stay under that figure, you shouldn’t end up owing any Income Tax at all.
The complication is that PAYE works cumulatively. It projects your annual earnings from each pay period, so if you were on full pay earlier in the year before falling ill, the system may assume your yearly income will be higher than it turns out to be. Tax can be deducted from your SSP even though your final annual income lands below £12,570. That money isn’t lost. It can be refunded.
Getting Overpaid Tax Back
HMRC often picks up overpayments on its own. After the tax year ends on 5 April, it reconciles what you actually earned against what was reported through PAYE. If you’ve paid too much, it sends a P800 tax calculation letter, usually between June and the following March, explaining the position and how to claim.4GOV.UK. Tax Overpayments and Underpayments
You can claim faster through your personal tax account online or via the HMRC app. Online refunds land within five working days. A cheque takes roughly 14 days from the date on the P800.5GOV.UK. Tax Overpayments and Underpayments – If Your Tax Calculation Letter (P800) Says You’re Due a Refund
If no P800 arrives and you believe you’ve overpaid, contact HMRC by phone or post to ask for a review. Have your P60, which summarises the year’s pay and deductions, ready to support the claim. If your employment ended during your illness, use your P45 instead.6GOV.UK. Your P45, P60 and P11D Form Payslips covering the SSP period help show what was taken and when.
What About Occupational Sick Pay
If your employer tops up SSP with contractual or occupational sick pay, that money is taxable too. HMRC treats it the same as your regular salary, with Income Tax and National Insurance taken through PAYE.2HM Revenue & Customs. Employment Income Manual – EIM76350 Where an employer pays your full salary during sick leave, the whole amount is taxed in the normal way. Your contract or staff handbook will say what, if anything, your employer offers above the statutory floor.
One boundary worth noting: SSP is for employees. Self-employed workers don’t receive it and so don’t face this tax question in the same form. If you’re self-employed and unable to work, Universal Credit or Employment and Support Allowance are the routes to look at, and each has its own tax treatment.