Background: Social disadvantage consistently predicts both self-reported distress and clinically diagnosed disorders such as depression. Yet, many individuals who are exposed to disadvantage do not report high levels of distress. This study extends our recent work showing that high cognitive ability may protect against the negative health consequences of exposure to disadvantaged backgrounds. We test whether this ‘buffer effect’ exists across clinically relevant indices of mental health in a population-representative sample. Methods: In total, 27 985 participants were drawn from the UK Household Longitudinal Study (Understanding Society). Clinical diagnoses of depression and clinically relevant measures of psychological distress [i.e. Short Form-12 (SF-12) Mental Component, General Health Questionnaire (GHQ)] and trait neuroticism were assessed. Cognitive ability was derived from performance on word recall, verbal fluency and numerical ability tasks. Early-life disadvantage was gauged using family background measures assessing parental education and occupation at age 14. Results: Background disadvantage predicted increased levels of reported psychological distress and neuroticism. These associations were moderated by cognitive ability. Across all available mental health measures, the negative association between early-life disadvantage and poor adult mental health was strongest at low (−1 S.D.) cognitive ability and was no longer evident at high (+1 S.D.) levels of cognitive ability. Conclusions: The results provide support for a cognitive buffering hypothesis linking high cognitive ability to a decrease in the magnitude of the social gradient in mental health. Those disadvantaged by both low socioeconomic status and low cognitive ability may benefit from targeted prevention and treatment programmes aiming to reduce socioeconomic disparities in mental health.