Do you ever wonder what happens to your paycheck when you take a sick day? If you’re receiving statutory sick pay, you may be wondering if tax is deducted from your payments. Statutory sick pay is a legal entitlement for those who have taken time off work due to an illness or injury. While it’s a valuable resource for those who need it, many people don’t know what their payments are subject to.
Fortunately, the answer is yes: tax is deducted from statutory sick pay. This may come as a surprise to some, as statutory sick pay is designed to provide a safety net for those who need time off work. However, it’s important to note that tax is automatically deducted from most types of income, and statutory sick pay is no exception. That being said, there are certain circumstances where you may be entitled to a tax refund, so it’s worth investigating further if you’re unsure about your tax status.
Overall, it’s crucial that employees are aware of how statutory sick pay works and what they’re entitled to. Tax deductions are just one of the many factors to consider when taking time off work due to an illness or injury. By being informed and prepared, employees can make the most out of their statutory sick pay and focus on their recovery without worrying about their finances.
Statutory Sick Pay (SSP)
Statutory Sick Pay (SSP) is a payment made by an employer to their employee when they’re unable to work because of sickness. It is paid for up to 28 weeks, and the current rate is £94.25 per week. Most employees are entitled to SSP, including part-time and temporary workers. However, there are certain criteria that must be met in order to qualify for SSP.
- To be eligible for SSP, the employee must have been off work sick for at least 4 days in a row, including weekends and bank holidays.
- The employee must earn at least £120 per week.
- The employee must provide their employer with evidence of their sickness, such as a doctor’s note, if they are off work for more than 7 days.
It’s important to note that although SSP is paid by the employer, it is funded by the government. Employers can claim back up to 92% of the SSP they pay to their employees. This means that although employers are responsible for paying SSP to their employees, it doesn’t come out of their own pocket.
One common question employees have is whether tax is deducted from their SSP. The answer is yes. SSP is treated the same as regular earnings when it comes to tax and National Insurance contributions. This means that tax and National Insurance will be deducted from any SSP the employee receives, just like it would be from their regular pay.
| Period | Rate |
|---|---|
| 2021/2022 tax year | £94.25 per week |
| 2020/2021 tax year | £95.85 per week |
If the employee earns less than the personal allowance (which is currently £12,570 for the 2021/2022 tax year), they won’t have to pay any tax on their SSP. However, if they earn above the personal allowance, they will be taxed on their SSP just like they would be on their regular pay.
In summary, SSP is a payment made by the employer to their employee when they’re unable to work because of sickness. It’s funded by the government and is subject to tax and National Insurance contributions, just like regular earnings.
Taxation of SSP
Statutory Sick Pay (SSP) is a payment made to employees by their employer when they are unable to work due to illness or injury. SSP is paid for up to 28 weeks and is subject to taxation. Here are some key things you should know about the taxation of SSP:
- SSP is subject to income tax, just like regular wages. This means that it will be taxed at the same rate as your other earnings.
- Your employer will deduct tax from your SSP payments in the same way they would for your regular wages. This means that tax will be withheld at source and you will receive a net payment after tax.
- If you are only receiving SSP and not your usual salary, you may be entitled to a tax refund at the end of the tax year if you have overpaid tax.
It is also worth noting that SSP is not subject to National Insurance contributions (NICs), either for the employee or the employer. This is because SSP is not classified as earnings for NIC purposes.
Here is a breakdown of the tax rates for SSP in the UK:
| Rate | Taxable Income |
|---|---|
| Basic rate | Up to £37,500 |
| Higher rate | Between £37,501 and £150,000 |
| Additional rate | Over £150,000 |
In summary, although SSP is subject to taxation, it is not subject to NICs. Your employer will deduct tax from your SSP payments in the same way they would for your regular wages, but you may be entitled to a tax refund at the end of the tax year if you have overpaid tax.
How tax is deducted from SSP
Statutory sick pay (SSP) is a payment made to employees who are unable to work due to illness or injury. This payment is made by their employer and is subject to tax deductions. The amount of tax deducted from your SSP is dependent on your tax code and how much you earn. Here are ways tax is deducted from SSP:
- Tax Code: Your tax code is determined by HM Revenue and Customs based on various factors, including your income and employment status. The tax code will determine how much tax will be deducted from your SSP. If you are unsure of your tax code, you can contact HM Revenue and Customs or check your payslip.
- Tax-Free Allowance: Every individual has a tax-free allowance, which is the amount you can earn before you start paying income tax. If you are earning below your tax-free allowance, you will not have any tax deducted from your SSP.
- Income Tax: Your SSP is subject to income tax deductions. The amount of income tax you will pay on your SSP is dependent on your tax code and how much you earn. If you are earning above the basic rate of tax, you will pay a higher amount of income tax on your SSP.
If you are unsure about how much tax you are paying on your SSP, you can check your payslip or contact HM Revenue and Customs. It is important to note that SSP is also subject to National Insurance contributions. These contributions are deducted in the same way as income tax.
Here is an example of how tax is deducted from SSP:
| Monthly Income | Tax Code | Tax-Free Allowance | Income Tax | SSP Received |
|---|---|---|---|---|
| £1500 | 1250L | £12,570 | £0 | £95.85 (per week) |
| £2500 | 1250L | £12,570 | £87.50 | £95.85 (per week) |
In this example, the individual is earning £1500 per month and has a tax code of 1250L. They are entitled to a tax-free allowance of £12,570 per year, which works out to be £1047.50 per month. As their monthly income is below the tax-free allowance, they are not paying any income tax on their SSP. However, if the individual is earning £2500 per month, they will be paying £87.50 in income tax on their SSP.
National Insurance on SSP
When an employee is on statutory sick pay, National Insurance contributions are deducted from both the employer and employee’s contributions. The employee will pay a lower rate which is currently at 12% while the employer pays the standard 13.8% rate. Unlike income tax, National Insurance is not deducted from any occupational sick pay paid by the employer.
- Employees who earn less than £120 per week are not required to pay National Insurance contributions on their SSP.
- Employers can claim back some or all of the SSP they pay to their employees because SSP is recoverable. This means that employers can recover up to 92% of the SSP paid to their employees. This applies to small businesses that pay less than £45,000 in National Insurance contributions annually.
- If an employee receives any benefits while they are on SSP, such as Jobseeker’s Allowance or Income Support, their National Insurance contributions will still be deducted.
It is important for employers to keep track of the National Insurance contributions made on SSP to ensure that it is deducted correctly and that the employer is able to claim back the correct amount. Employers should also be aware of the current rates and rules regarding National Insurance contributions on SSP to avoid any penalties from HM Revenue & Customs.
| Employee National Insurance | Employer National Insurance |
|---|---|
| 12% of earnings over £184 per week and up to £967 per week | 13.8% of earnings over £184 per week and up to £967 per week |
| No contributions are payable on earnings below £184 per week | No contributions are payable on earnings below £170 per week |
If you have any questions or concerns regarding National Insurance on SSP, it is best to consult a tax expert for advice.
Tax-free allowances on SSP
Statutory Sick Pay (SSP) is paid to employees who are unable to work due to illness or injury and meet certain eligibility criteria. It is paid by employers for up to 28 weeks and is subject to income tax and National Insurance contributions (NICs). However, there are some tax-free allowances that can reduce the amount of tax and NICs that are deducted from SSP payments.
- Personal Allowance: This is an amount of tax-free income that everyone is entitled to receive each year. For the 2021/22 tax year, the personal allowance is £12,570. This means that the first £12,570 of any income, including SSP, is tax-free.
- Blind Person’s Allowance: This is an additional tax-free allowance for people who are registered as blind. For the 2021/22 tax year, the allowance is £2,520.
- Age-related Allowances: These are additional tax-free allowances for people who are over a certain age. However, they are being phased out and are only available to people born before 6 April 1948. For the 2021/22 tax year, the allowances are £3,530 (for those born between 6 April 1938 and 5 April 1948) and £2,360 (for those born before 6 April 1938).
It’s important to note that these tax-free allowances are not automatically applied to SSP payments. Employees must inform their employer of their entitlement to these allowances and provide evidence of their eligibility, such as a P45 or a tax certificate. Failure to do so could result in overpayment of tax and underpayment of SSP.
In addition to tax-free allowances, there are also some expenses that can be paid tax-free to employees who are receiving SSP:
- Travel expenses: If an employee is required to attend medical appointments or hospital treatment while receiving SSP, their employer can pay for the cost of travel, such as public transport or mileage, tax-free.
- Medical expenses: If an employee incurs medical expenses related to their illness or injury, such as prescription costs or medical equipment, their employer can reimburse these expenses tax-free.
Employers should keep a record of any tax-free allowances or expenses paid to employees who are receiving SSP, as they may need to report them to HM Revenue and Customs (HMRC) at the end of the tax year.
| Tax-free Allowance | 2021/22 Amount |
|---|---|
| Personal Allowance | £12,570 |
| Blind Person’s Allowance | £2,520 |
| Age-related Allowance (born 6 April 1938 to 5 April 1948) | £3,530 |
| Age-related Allowance (born before 6 April 1938) | £2,360 |
Overall, tax-free allowances and expenses can help to reduce the amount of tax and NICs that are deducted from SSP payments. It’s important for employees to inform their employer of their entitlement to these allowances and for employers to keep accurate records of any tax-free amounts paid to employees who are receiving SSP.
SSP and State Benefits
Statutory Sick Pay (SSP) is a type of government benefit provided to employees who are unable to work due to illness or injury. It is paid by the employer for up to 28 weeks and is subject to tax deductions, like regular income. However, the amount of tax deducted from SSP is usually lower than the amount deducted from regular income as SSP is generally lower in amount.
State benefits refer to other government-provided financial assistance programs for individuals who are unable to work due to illness or injury. These benefits are also subject to tax deductions but may not affect an individual’s eligibility for SSP. Examples of state benefits include Employment and Support Allowance (ESA) and Universal Credit.
How State Benefits Affect SSP
- If an individual is receiving SSP, they may still be eligible for state benefits. However, the amount of state benefits received may be reduced by the amount of SSP received. This is known as an “overlapping benefit.”
- In some cases, an individual may be eligible for state benefits after their SSP period has ended. For example, if an individual’s SSP period lasts for 28 weeks and they are still unable to work after that time, they may be eligible for ESA.
- Individuals who are eligible for both SSP and state benefits should always seek advice from a financial advisor or specialist to determine their best course of action.
SSP and Tax Deductions
As previously mentioned, SSP is subject to tax deductions like regular income. However, the amount of tax deducted from SSP is often lower due to the lower amount of the benefit. In addition, employers are not required to deduct National Insurance contributions from SSP.
| Income | Tax Rate | National Insurance Rate |
|---|---|---|
| Regular Income | 20% | 12% |
| Statutory Sick Pay | 12% | N/A |
It is also important to note that SSP may not be subject to tax deductions if it is being paid as part of an Occupational Sick Pay scheme. In this case, the scheme would be responsible for any tax deductions.
In conclusion, SSP is subject to tax deductions like regular income. State benefits may affect an individual’s eligibility for SSP and may be subject to overlapping benefits. It is always recommended to seek advice from a financial advisor or specialist to determine the best course of action.
Employer Responsibilities on SSP and Tax Deductions
Statutory Sick Pay (SSP) is a payment made to employees who are unable to work due to illness or injury for at least four consecutive days. As an employer, it is your responsibility to ensure that you comply with the SSP regulations set out by the government. This includes managing and paying SSP and tax deductions. Here’s what you need to know.
Employer Responsibilities on SSP
- In order to be eligible for SSP, an employee must be earning at least £120 per week.
- You are required to pay SSP for up to 28 weeks of absence due to illness (this is known as the ‘SSP period’).
- If an employee is absent from work for more than 28 weeks, they may be eligible for other benefits such as Employment and Support Allowance (ESA).
- You are not required to pay SSP for the first three days of absence (known as ‘waiting days’).
- You can ask for evidence of illness from your employee, such as a fit note, if they are absent for longer than seven days.
Tax Deductions on SSP
SSP is subject to tax and National Insurance deductions in the same way as regular pay. You should deduct tax and National Insurance contributions from the employee’s SSP payment before paying it to them. The rate of tax and National Insurance contributions is based on the employee’s individual tax code and rate.
The tax and National Insurance deductions that you make on SSP should be reported to HM Revenue and Customs (HMRC) via your payroll system. You should include SSP payments on both employee payslips and reports that you submit to HMRC.
Conclusion
Managing SSP and tax deductions can be a complex process, but it is an essential part of your responsibilities as an employer. By understanding the regulations, you can ensure that you pay SSP correctly and make the right deductions for tax and National Insurance contributions. This will help you to avoid penalties from HMRC and maintain a good relationship with your employees.
| Important things to remember |
|---|
| You must pay SSP for up to 28 weeks of absence due to illness. |
| SSP is subject to tax and National Insurance deductions. |
| You should report SSP payments to HMRC via your payroll system. |
By following these guidelines, you can ensure that you meet your employer responsibilities on SSP and tax deductions.
Is tax deducted from statutory sick pay?
1. Do I have to pay tax on statutory sick pay?
Yes, statutory sick pay is considered taxable income, which means that it is subject to income tax.
2. How much tax is deducted from statutory sick pay?
The amount of tax deducted from your statutory sick pay will depend on your income and tax bracket. HM Revenue and Customs (HMRC) will use your tax code to determine how much tax you should pay.
3. Can I get a tax refund on my statutory sick pay?
If you paid too much tax on your statutory sick pay, you may be eligible for a tax refund. You can contact HMRC to find out if you are eligible and how to claim your refund.
4. Do I have to pay National Insurance on statutory sick pay?
Yes, you will still have to pay National Insurance contributions on your statutory sick pay. This will help you qualify for certain benefits and support payments.
5. What happens if I receive other benefits while on statutory sick pay?
If you receive other benefits while you are on statutory sick pay, such as housing benefits or jobseeker’s allowance, these benefits may also be subject to tax.
6. Will my employer deduct tax from my statutory sick pay?
Your employer is responsible for deducting income tax and National Insurance contributions from your statutory sick pay. You should receive an itemised payslip that shows how much tax has been deducted.
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We hope that this article has answered your questions about tax deductions and statutory sick pay. If you have any further queries, don’t hesitate to contact HMRC or talk to your employer. Remember to visit us again for more informative articles!