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Group Income Protection Insurance UKEmployer Guide 2026
Understand group income protection for UK employers. How it works, tax treatment, deferred periods, and how it compares to individual income protection and key person cover.
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Book a Free ConsultationKey Facts About Group Income Protection
Group income protection (GIP) replaces a proportion of employee income during long-term illness or disability. HMRC EIM21820 governs the tax treatment. Employer premiums are generally deductible as a business expense, while benefit payments are taxable as earnings through PAYE. Aviva paid £61.8m in group IP claims in 2024, reflecting strong insurer commitment to supporting businesses and employees.
- -Group IP replaces employee income during long-term illness or disability
- -HMRC EIM21820 governs the tax treatment of group income protection
- -Employer premiums are allowable deductions for Corporation Tax
- -Benefit payments are taxable as earnings via PAYE
- -Aviva paid £61.8m in group IP claims in 2024
What Is Group Income Protection and How Is It Taxed?
Group income protection is an employer-funded policy that pays a percentage of an employee's salary — typically 50–75% — if they cannot work due to illness or injury. Unlike individual income protection, premiums are paid by the company, and payments flow through the payroll.
Under HMRC EIM21820, employer-paid GIP premiums are a deductible business expense. However, when a claim is paid, the benefit is treated as employment income and taxed through PAYE, with National Insurance contributions also due. This contrasts with individual income protection, where personally paid premiums are not tax-deductible but benefits are paid tax-free.
According to the ABI, UK insurers paid a record £8 billion in protection claims in 2024, underscoring the value of employer-provided income protection. For businesses considering broader protection, see our guide to key person income protection.
Deferred Periods and How Group IP Differs from Individual IP
A key feature of group income protection is the deferred period — the waiting time before benefits begin. Common deferred periods range from 4 weeks to 52 weeks, and this directly impacts premium costs:
- 4 weeks: Most expensive, but provides the fastest support
- 13 weeks: The most common choice, aligning with statutory sick pay duration
- 26 weeks: A cost-effective middle ground for businesses with their own sick pay schemes
- 52 weeks: Lowest premiums, suitable where generous company sick pay already exists
Group IP differs from individual IP in several ways. Premiums are typically 20–40% cheaper per head due to group discounting, medical underwriting is simplified (often free cover limits apply), and the employer manages the policy centrally. However, employees lose cover when they leave employment. For directors considering personal cover, see our guide to income protection for directors.
Cost Factors for Group Income Protection
Several factors determine the cost of group income protection for your business:
- Employee demographics: Average age and health profile of the workforce
- Industry sector: Manual or hazardous occupations attract higher premiums
- Benefit level: Typically 50–75% of salary, with higher percentages costing more
- Deferred period: Shorter waiting times increase costs significantly
- Claims history: Previous claims experience affects renewal pricing
According to Aviva's 2025 claims data, the insurer paid £61.8m in income protection claims, demonstrating that these policies pay out when needed. The Group Risk Development (GRiD) provides industry benchmarking data. As noted by Wiltshire Friendly, the tax-deductible nature of premiums makes group IP a cost-effective benefit.
Group Income Protection Insurance FAQs
What is group income protection insurance?
Group income protection (group IP) replaces a proportion of an employee's salary (typically 50-75%) if they are unable to work due to illness or injury. The employer pays the premiums, which are tax-deductible. Payouts are taxable through PAYE.
Is group income protection tax deductible?
Yes. Employer premiums are deductible as a business expense under HMRC EIM21820. However, the benefit paid to employees is taxable through PAYE and subject to NI.
What is a deferred period for group income protection?
The deferred period is the waiting time between the employee becoming unable to work and the benefit starting. Common options: 4, 8, 13, 26 or 52 weeks. Longer deferred periods have lower premiums.
How is group IP different from death in service?
Death in service pays a lump sum on death. Group IP pays a monthly income during long-term illness. They protect against different risks and most employers offer both.
Learn More About Your Options
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We are a comparison and information resource, not an insurer or broker. For regulated advice, consult a qualified professional.