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Tax Treatment of Statutory Sick Pay
Statutory Sick Pay (SSP) is a payment made by employers to employees who are unable to work due to illness or injury. SSP is taxable and subject to National Insurance contributions.
Tax Deductions from SSP
Tax is deducted from SSP at the employee’s usual tax code. The amount of tax deducted will depend on the employee’s income and tax allowances.
- Employees earning less than the Personal Allowance will not pay any tax on SSP.
- Employees earning between the Personal Allowance and the Higher Rate Threshold will pay tax on SSP at the basic rate (20%).
- Employees earning above the Higher Rate Threshold will pay tax on SSP at the higher rate (40%).
National Insurance Contributions
National Insurance contributions are also deducted from SSP at the usual rates. The rates depend on the employee’s earnings and whether they are employed or self-employed.
| Employee Status | Class 1 National Insurance Contributions |
|---|---|
| Employed | 12% |
| Self-employed | 9% |
Statutory Sick Pay and Tax Deductions
It is important to understand how tax deductions work when receiving Statutory Sick Pay (SSP) to ensure accurate income calculations. This article provides a comprehensive overview of SSP and tax implications, based on official guidance from HMRC.
HMRC Guidance on Statutory Sick Pay Deductions
- SSP is taxable income and subject to income tax and National Insurance (NI) deductions.
- Tax is deducted automatically by employers from SSP payments.
- The amount of tax deducted varies depending on an individual’s tax code.
- SSP is not subject to Class 1 NI contributions, which are usually deducted from earnings.
It is recommended to
- Check your tax code with HMRC to ensure it is correct.
- Track your SSP payments and tax deductions to avoid any discrepancies.
- Be employed by you for at least 4 weeks before the first day of sickness.
- Earn at least £123 per week before tax.
- Be unable to work because of illness or injury.
- Provide you with a fit note from their doctor if they are sick for more than 7 days.
- SSP is not taxable.
- SSP is not subject to NI.
- Wages or salary
- Bonuses
- Overtime pay
- Holiday pay
- Pensions
- Life insurance
- Health insurance
- Statutory Maternity Pay (SMP)
- Statutory Paternity Pay (SPP)
- Shared Parental Pay (ShPP)
Example of Tax Deductions from SSP
The following table illustrates how tax deductions are applied to SSP payments:
| SSP Amount | Tax Code | Tax Deduction |
|---|---|---|
| £100 | 1250L | £0 |
| £100 | 1150L | £10 |
| £100 | 1050L | £20 |
As seen in the table, the amount of tax deducted increases with a lower tax code, indicating a higher taxable income.
Conclusion
Understanding the tax implications of SSP ensures accurate income calculations and avoids potential issues with HMRC. By following the guidance outlined in this article, individuals can confidently manage their finances while receiving SSP.
Employer Responsibilities for Statutory Sick Pay
Employers are responsible for paying Statutory Sick Pay (SSP) to eligible employees who are unable to work due to illness or injury. SSP is paid at a rate of £99.35 per week for up to 28 weeks.
To be eligible for SSP, employees must:
You must pay SSP from the fourth day of sickness. The first 3 days of sickness are known as the “waiting days” and are not paid.
You can deduct SSP from an employee’s salary, but you must do so in a way that does not reduce their pay below the National Living Wage or National Minimum Wage. You must also make sure that the employee is aware that SSP is being deducted from their salary.
If you fail to pay SSP to an eligible employee, they may be able to claim back the money from you through an employment tribunal.
| From | To | Rate per week |
|---|---|---|
| 6 April 2023 | 5 April 2024 | £99.35 |
Impact of SSP on Pay and Benefits
Statutory Sick Pay (SSP) is a payment made by employers to eligible employees who are unable to work due to sickness or injury. It is paid at a rate of £96.35 per week for up to 28 weeks.
Tax and National Insurance (NI)
Other Pay and Benefits
SSP does not affect other pay and benefits, such as:
However, SSP may affect other benefits that are based on earnings, such as:
| Benefit | Impact of SSP |
|---|---|
| SMP | SSP is included in the calculation of SMP. |
| SPP | SSP is included in the calculation of SPP. |
| ShPP | SSP is included in the calculation of ShPP. |
Well, there you have it, folks! I hope this article has cleared up any confusion about whether or not tax is deducted from statutory sick pay. Remember, the best way to get up-to-date information on tax-related matters is to check with the government’s official website, as laws and regulations can change over time. Thanks for sticking with me through this tax adventure! If you have any more questions or find yourself in another tax-related quandary, don’t hesitate to drop by again. Keep calm and calculate on, my friends!