AIMS: To estimate the effect of incident disease on loss of annual income on an individual level, to analyse whether loss of job mediates the effect on loss of annual income, to analyse whether an association is modified by socioeconomic position, and to determine whether the effect on annual income is similar across three different diagnostic categories with different consequences in terms of functional limitations. METHODS: This was a register-based study with a longitudinal design using a register of the Danish population covering 412,450 person years. Data on hospitalization are linked to information on income and employment. The setting was a 10% random sample of all individuals living in Denmark and aged 43-60 years in 1996-99. RESULTS: Male cases of acute myocardial infarction (AMI), female cases of breast cancer and both male and female cases of intervertebral disease were associated with an increased and equally strong risk for experiencing a loss of annual income corresponding to one income decile (>25,000 DKK) in the year following disease (odds ratio (OR) from 1.37 (95% confidence interval (CI) 1.09-1.72) to 1.57 (95% CI 1.21-2.04)). No significant effect of female AMI was found. The effects of intervertebral disease and male AMI were mediated by loss of employment. This was not the case for breast cancer. No modifying effects of income level or occupational class were found. CONCLUSIONS: Despite different functional limitations, the three disorders have equally strong effects on annual income. This might be interpreted as a buffering effect of the welfare policies in relation to the more discriminating demands of the labour market.