The aims of this study were to assess: (1) the relationship between PTSD and impairment, (2) whether there is a threshold in the association of PTSD score and impairment, and (3) whether any of the PTSD criteria are more strongly associated with impairment. We studied 10,069 service personnel from a representative sample of the British Armed Forces to assess the effects of the Iraq war. Participants completed the PTSD checklist (PCL), the general health questionnaire-12 (GHQ-12), the alcohol use disorder identification test (AUDIT) and five questions to assess impairment. 78% of those with a PCL-score of 50 or more endorsed at least one impairment item in comparison to 27% of those with a score below 50. The odds ratio (OR) of impairment in the PCL group with a score of 50 or more was 16.7 (95% CI 12.9-21.6). There was an increasing risk of impairment with an increasing category of PCL-score without a noticeable threshold. For each PTSD subscale: intrusiveness, avoidance/numbing and hyper-arousal, divided into four score categories, there was an increased association with impairment, but the association of avoidance/numbing with impairment was the greatest and independent of the other two criteria (OR 7.2 (95% CI 4.8-10.9). Having a good relationship with a partner had minimal effect on the level of association between PTSD and impairment. Functional impairment is a serious problem for those with PTSD. The impairment is not confined to those with the highest PCL-score. Avoidance/numbing is the criterion which makes the greatest independent contribution to impairment.