How gross-to-net works

The order matters

When you click Calculate on a pay run, Blankitt HR works through each employee in this order:

1. Add up the gross pay: basic salary + any statutory leave pay + overtime + bonus + other taxable amounts
2. Take off salary sacrifice (pension, cycle to work, EV scheme, etc.) — this happens before tax and NI, which is why sacrifice saves both
3. Work out income tax (PAYE) — using the employee's tax code and year-to-date totals
4. Work out National Insurance (employee + employer)
5. Work out any student loan deduction
6. Work out pension contributions (employee + employer)
7. Subtract everything — what's left is net pay

The payslip lays it out in the same order so it always adds up cleanly.

Why each step works the way it does

Salary sacrifice goes first

By taking sacrifice off gross before tax and NI calculate, both the employee and the employer save NI on the sacrificed amount. The employee also saves income tax. This is the whole point of sacrifice schemes.

Tax and NI run in parallel

PAYE and NI use different bands, different thresholds and different cumulative methods. They each look at the same post-sacrifice gross pay independently — they don't affect each other.

Student loan comes after tax and NI

A student loan isn't a tax credit — it's an additional deduction. It applies to your post-sacrifice gross, not your net.

Pension depends on the mode

The three pension modes — relief at source, net pay, and salary sacrifice — each interact with tax and NI differently. Chapter 4 covers this in detail.

Year-to-date

Income tax in the UK uses the cumulative method by default. That means Blankitt HR adds up everything you've earned and paid in tax from 6 April onwards, works out what you should have paid in total, and adjusts this period to match.

National Insurance is normally periodic — each pay period stands alone. For directors, NI switches to a year-to-date method so that variable pay (e.g. bonus-heavy months) doesn't cause over-deduction.

What if I want to see the maths?

Open any finalised pay run, click an employee row, then click Show calculation. It breaks down every step with the actual numbers used. Useful when you need to convince an employee (or your accountant) that the figure is right.

Next

The next chapters cover PAYE, NI, pension and salary sacrifice in detail.