National 5MathsSQAApplications of MathematicsRevision NotesFinancial SkillsPay & SalaryNet Pay

Net Pay (SQA National 5 Applications of Mathematics): Revision Note

Exam code: X844 75

Dan Finlay

Written by: Dan Finlay

Reviewed by: Roger B

Updated on

Net pay

What is net pay?

  • Net pay is the total amount a person earns after deductions are taken

  • It is the amount of the money that the person takes home on payday

How do I calculate net pay?

  • Calculate the gross pay

    • Add the amounts together for:

      • Basic pay/salary

      • Overtime

      • Bonuses

      • Commission

      • Benefits and allowances

  • Subtract the deductions

    • Subtract the amounts for:

      • National Insurance

      • Income Tax

      • Pension contributions

Payslip detailing pay date 28/10/2025, with earnings of £2620, deductions of £473.10, and net pay of £2146.90 for employee Bill Payton.
Example of a payslip

Examiner Tips and Tricks

Exam questions break the calculation of net pay down into steps. One part might ask you to find the gross pay, though sometimes this is given in the question. One part might ask you to find the National Insurance contribution. The final part might ask you to find the net pay.

Worked Example

Gwen works for a construction company.

Her annual salary is £25,500.

National Insurance is calculated on a person's wage before deductions such as pension contributions.

National Insurance rates

Up to £12,570

0%

From £12,570 to £50,270

8%

Over £50,270

2%

(a) Calculate Gwen's annual National Insurance payment.

Gwen pays 8% of her annual salary into her pension.

Gwen's annual income tax is £2574.

(b) Calculate Gwen's annual net pay.

Answer:

(a) National Insurance payment

STEP 1

Calculate the amount of the Gwen's wage that falls into the second threshold

£ 25 comma 500 minus £ 12 comma 570 equals £ 12 comma 930

STEP 2

Multiply this by 8%

table row cell 8 percent sign cross times £ 12 comma 930 end cell equals cell 0.08 cross times £ 12 comma 930 end cell row blank equals cell £ 1034.40 end cell end table

£1034.40

(b) Net pay

STEP 1

Calculate the amount paid into Gwen's pension

table row cell 8 percent sign cross times £ 25 comma 500 end cell equals cell 0.08 cross times £ 25 comma 500 end cell row blank equals cell £ 2040 end cell end table

STEP 2

Subtract all deductions from her annual salary

£ 25 comma 500 minus £ 1034.40 minus £ 2040 minus £ 2574 equals £ 19 comma 851.60

£19,851.60

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    Author
    Reviewer
    Dan Finlay

    Author: Dan Finlay

    Expertise: Maths Subject Lead

    Dan graduated from the University of Oxford with a First class degree in mathematics. As well as teaching maths for over 8 years, Dan has marked a range of exams for Edexcel, tutored students and taught A Level Accounting. Dan has a keen interest in statistics and probability and their real-life applications.

    Roger B

    Reviewer: Roger B

    Expertise: Maths Content Creator

    Roger's teaching experience stretches all the way back to 1992, and in that time he has taught students at all levels between Year 7 and university undergraduate. Having conducted and published postgraduate research into the mathematical theory behind quantum computing, he is more than confident in dealing with mathematics at any level the exam boards might throw at you.