As a child Actress in several films she was billed as Sarah Nicholls. In her early 20s, she appeared in David Lynch's The Elephant Man, Michael Palin's The Missionary and as Cordelia Flyte in Brideshead Revisited. Since then, she has worked almost exclusively in television and theatre. Debuting in Michael Lindsay-Hogg's original staging of Whose Life Is It Anyway? in 1978, she went on to perform in Robert Strura's revival of Three Sisters with Vanessa Redgrave, Stephen Daldry's acclaimed National Theatre version of J.B. Priestley's An Inspector Calls and in the Olivier Award-winning productions of Pravda, with The Elephant Man co-star Sir Anthony Hopkins and Terry Johnson's Hysteria. Her supporting performances in the 2008 West End revivals of Noël Coward's The Vortex and Harley Granville Barker's Waste earned her the 2009 Clarence Derwent Award from Equity. She also played the conniving art critic Rivera in the Royal National Theatre production of the Howard Barker drama, Scenes from an Execution.

Nicholls is the daughter of actors Anthony Nicholls and Faith Kent. She trained at the Central School of Speech and Drama. Nicholls married Director Charles Sturridge on 6 July 1985; they have two sons, including actor Tom Sturridge, and a daughter. Her grandfather is photojournalist Horace Nicholls.

She appeared in the 1995 television Persuasion an adaptation of Jane Austen's novel. She has made guest appearances on several television mystery series, including Kavanagh QC, Prime Suspect, Midsomer Murders, Lewis, The Ruth Rendell Mysteries ("May and June", 1997), Foyle's War, Second Sight starring Clive Owen, and the 2012 Christmas episode of Downton Abbey, a role she reprised for the 2014 season. She has also appeared in several works directed by her husband, Charles Sturridge, including his 1995 television adaptation of Gulliver's Travels, where she portrayed the Liliputian Empress, the 1997 film Fairy Tale: A True Story and Shackleton in 2002.