Direct out-of-pocket payments for health care are not only a barrier to accessing health care but they also endanger households’ welfare. This study assesses the impact of out-of-pocket payments for health care on the welfare of households in Uganda. Using data from the nationally representative Uganda National Household Survey 2009/10, the study assesses the extent and intensity of catastrophic out-of-pocket health care payments using a threshold that varies with household’s socio-economic status. The study also assesses the impact of out-of-pocket payments on the poverty status of the population. The household characteristics associated with both catastrophic and impoverishment effect of out-of-pocket payments for health care are then identified using a multivariate logistic model. Results indicate that households generally lack financial protection. The extent and intensity of catastrophic payments and impoverishment due to the out-of-pocket payments is very high. Householdswith a member aged above sixty five years or a member aged below five years were found to have a higher likelihood ofincurring both catastrophic payments and impoverishment. While utilisation of both public and private health facilities were both associated with a high likelihood of financial risk, this risk was higher among households that used private facilities. There is a need for concerted efforts aimed at reducing the level of out-of-pocket payments for health care in Uganda. This is achievable by adopting mandatory prepayment mechanism to finance health care. Initiatives for reducing out-of-pocket payments should target the most vulnerable households as identified in the study.