Can you get statutory sick pay if you’re self-employed?

No. Statutory sick pay is up to £123.25 a week for up to 28 weeks and it is paid by an employer to an employee. If you work for yourself there is no employer to pay it. New Style Employment and Support Allowance may be available instead, at up to £95.55 a week if you are 25 or over during the first 13 weeks, but it depends on your National Insurance record.

How do insurers work out your income if you’re self-employed?

Generally from your filed accounts and your self assessment rather than a payslip. Because self-employed income varies, insurers commonly look at more than one year, and they differ in how they handle a rising or falling trend. There is no single industry rule, which is why it is worth having two or three years of figures ready before you apply.

Can a limited company director get income protection based on dividends?

Dividends are often taken into account, but insurers differ on how, and some also consider your share of retained profit. Because there is no consistent market-wide rule, the practical answer is to have your accounts, your self assessment and a clear salary and dividend split for the last two or three years available, so you get a real figure rather than an estimate.

Do you need life insurance and income protection, or just one?

If someone depends on you financially and there is a mortgage, life cover usually comes first because it is cheaper and deals with the outcome you cannot recover from. If you have no dependants but no savings buffer either, income protection tends to do more work, because being off for months is much more likely than dying. Most people with a family and no buffer are better off with a small amount of both.

What deferred period should a self-employed person choose?

Match it to your savings rather than to sick pay you do not get. Divide your accessible savings by your essential monthly outgoings, and that is roughly your runway. A longer deferred period costs less, so choosing one that matches the time you could genuinely cover yourself brings the premium down without leaving a gap.

Self-Employed With No Sick Pay? What Three Months Off Actually Costs

The short answer

If you work for yourself and you stop working, the money stops.

There is no employer topping you up for a month. Statutory sick pay does not apply to you, because it is paid by an employer to an employee and you are neither. What is left is New Style Employment and Support Allowance, if your National Insurance record qualifies you for it, at a rate well below what most households run on.

That is the gap. Everything else on this page is about how big it is and what fills it.

What you actually get if you stop working

Worth being precise, because the numbers are public and most articles about this do not print them.

Statutory sick pay is up to £123.25 a week for up to 28 weeks, and it is paid by your employer. If you are self-employed there is no employer, so there is nothing.

New Style Employment and Support Allowance is the one that may apply. During the first 13 weeks, called the assessment phase, it is up to £95.55 a week if you are 25 or over, and up to £75.65 if you are under 25. After that it is up to £95.55 a week in the work-related activity group or up to £145.90 in the support group.

It is not automatic. Eligibility depends on having paid enough National Insurance, usually across the last two to three tax years, so it is worth checking your record on GOV.UK rather than assuming.

Universal Credit may also be available depending on your household’s circumstances, and that is genuinely worth looking into, but it is means tested against savings and a partner’s income in a way ESA is not.

Three months off, worked through

Here is the comparison nobody seems to run. Same person, same money, different employment status.

Take someone taking home around £2,250 a month, which is roughly £519 a week.

Twelve weeks off work	Total received
Employed, four weeks full company sick pay then SSP	£3,063
Employed, three months full company sick pay	£6,231
Self-employed, New Style ESA only	£1,147

Illustrative figures, using the current published rates.

Against an employer that pays four weeks and then hands you over to SSP, which is not generous, the self-employed version is £1,916 worse off over twelve weeks. Against a decent employer paying three months in full, it is £5,084 worse off.

And that is only the incoming side. The mortgage, the nursery and the direct debits carry on at exactly the same rate whether you are working or not.

Stretch it to six months and it does not improve much. On the same rates, ESA over 26 weeks comes to somewhere between roughly £2,500 and £3,150 depending on which group you are placed in. That is around six months of household bills arriving as about six weeks of money.

Why self-employed people end up buying two things

Employees tend to buy life cover and think that is protection sorted. People who work for themselves usually end up with two policies, and it is worth understanding why rather than being sold it.

Life insurance deals with the thing that would end your income permanently. Income protection deals with the far more likely thing, which is that you are off for months and then come back.

For an employee, the second one is partly covered by their employer. For you it is not covered at all. So the product that does the most work for a self-employed parent is usually income protection, which is the opposite of how most people rank them.

If you can only afford one right now

A fair question and it deserves a straight answer rather than “it depends on your circumstances”.

If somebody depends on you financially and there is a mortgage, life cover first. It is the cheaper of the two and it deals with the outcome that has no recovery.

If you have no dependants but you do have a mortgage or rent to pay and no savings buffer, income protection first, because being off work for six months is far more likely than dying.

If you have both a family and no buffer, which is most people reading this, the usual answer is a small amount of both rather than a lot of one. Splitting the budget is generally better than leaving one risk entirely uncovered.

Sole trader or limited company director

These get treated as the same thing in almost everything written about this, and they are not. Work out which you are before you go any further, because the rules diverge from here.

Sole trader. Your business and you are the same legal person. Your income for insurance purposes is generally your net profit, evidenced by your self assessment.

Limited company director. The company is a separate legal person. You probably pay yourself a small salary and take the rest as dividends, and that is exactly where the complications start.

If you genuinely do not know which you are, look at whether you file a company tax return and have a company number at Companies House. If you do, you are a director.

How insurers work out an income that moves around

This is the question every self-employed person actually has and almost nobody answers properly.

A salaried employee hands over a payslip. You cannot, so an insurer will look at your filed accounts and your self assessment instead. Because self-employed income moves around, insurers commonly look at more than one year, and different insurers handle a rising or falling trend differently.

There is no single industry rule here. What one insurer averages, another takes the most recent year of, and a third caps. That variation is genuinely why a broker earns their keep on a self-employed case, because the difference between insurers is not the premium, it is whether the income you actually earn is the income they will insure.

The benefit is also capped at a proportion of your earnings rather than all of it, deliberately, so there is always a financial reason to go back to work. Your adviser will tell you where that cap sits for the insurer they are recommending.

If you have been trading for less than a full year, say so early. Some insurers will look at a shorter history than others, and knowing that before you apply saves a declined application sitting on your record.

Taking dividends: what a one-person company has to evidence

Here is the specific hole in every page ranking for this.

If you are a director paying yourself a £12,000 salary and taking £48,000 in dividends, your “income” is not obviously either number. Insurers vary in how they treat the dividend portion, and some will look at your share of retained profit as well.

We are not going to invent a rule here, because there is not one that holds across the market. What we can tell you is what to have ready, so that whoever you speak to can give you a straight answer rather than a guess.

Your last two, ideally three, sets of company accounts
Your personal self assessment returns for the same years
A clear split of salary versus dividends for each year
Your shareholding percentage, if you are not the only shareholder
Retained profit figures, in case the insurer counts them
An honest note on the trend, because a business that grew 40% last year and a business that shrank 20% are different conversations

Have those to hand and the question stops being difficult. Go in without them and you will get a range rather than an answer.

Relevant life cover, and when to ask your accountant

If you run a limited company, you will come across this. It is a life policy the company takes out on an employee, and a director counts as an employee.

The reason people ask about it is the tax treatment, which differs from paying for a personal policy out of taxed income. That treatment depends on your company’s circumstances, so we are not going to put numbers on it here and neither should any other website. It is a question for your accountant, and it is a good question to ask them.

What is worth knowing is that it exists, that it is generally written into a trust, and that whether it suits a one-person company with no other employees is a question worth asking specifically rather than assuming either way.

Choosing a deferred period from your savings runway

The deferred period is how long you wait after stopping work before an income protection policy starts paying. It is the biggest lever you have on the premium, and choosing it is simpler than it sounds.

An employee matches it to their employer sick pay. You do not have any, so match it to your savings instead.

Work out your essential monthly outgoings. Mortgage or rent, bills, food, childcare, minimum debt payments. Then divide your accessible savings by that number. If you have £6,000 and your essentials are £2,000 a month, you have a three month runway, so a three month deferred period costs less than a four week one and you lose nothing you would actually have used.

Be honest about “accessible”. Money you would have to break something to reach does not count, and neither does the money you would want left over at the end of it.

What to have ready before you apply

None of this is hard, it is just easier collected in advance.

Two or three years of accounts and self assessment returns
Your salary and dividend split if you are a director
Your essential monthly outgoings, for the deferred period conversation
A rough figure for the mortgage or rent and how long is left on it
Your GP practice details
An honest medical history, including anything you have seen someone about recently

That last one matters more than people expect. Disclosing something that turns out not to affect the price is a two minute conversation. Not disclosing something and having it surface at claim is the thing that goes wrong.

No sick pay, two kids and a mortgage: what happens if you’re self-employed and can’t work for three months