Clean the red peppers, remove seeds, and cut into pieces. Finely dice the onion. Heat the oil in a large pan over medium heat. Add the peppers and onion, season with salt, pepper, and thyme, and sauté for 5 minutes.
Drizzle the cod fillets lightly with lemon juice and season both sides with salt and pepper.
In a small bowl, mix the sour cream, milk, and paprika powder until combined.
Transfer the pepper and onion mixture to a baking dish. Arrange the cod fillets on top. Pour the sour cream mixture over the fish.
Bake in a preheated oven at 200 °C (392 °F) for 15–20 minutes, until the cod is cooked through and flakes easily.