From 1 January 2026, PAYE (Pay As You Earn) in Nigeria is calculated under the Nigeria Tax Act 2025, which replaced the old Personal Income Tax Act rules for individuals. If you are a salary earner, the change affects how much tax comes off your payslip every month. This guide explains the new tax bands, what you can deduct, and how to calculate your own PAYE step by step, with worked examples.
What changed in 2026?
According to PwC’s Nigeria tax summary and a DLA Piper Africa payroll FAQ, the main changes for employees are:
- New tax bands running from 0% to 25%, replacing the old 7%–24% bands.
- The first ₦800,000 of yearly chargeable income is taxed at 0%.
- The Consolidated Relief Allowance (CRA) is gone. It used to be ₦200,000 or 1% of gross income (whichever is higher) plus 20% of gross income.
- Rent relief replaces it: 20% of the annual rent you pay, up to a maximum of ₦500,000, if you declare and support it with evidence.
- Minimum wage earners (₦70,000 a month or less) are not liable to PAYE.
The new PAYE tax bands
| Annual chargeable income | Rate |
|---|---|
| First ₦800,000 | 0% |
| Next ₦2,200,000 (up to ₦3m) | 15% |
| Next ₦9,000,000 (up to ₦12m) | 18% |
| Next ₦13,000,000 (up to ₦25m) | 21% |
| Next ₦25,000,000 (up to ₦50m) | 23% |
| Above ₦50,000,000 | 25% |
Source: PwC Tax Summaries – Nigeria.
These are marginal rates. Each rate applies only to the slice of income inside that band. A raise that pushes you into a higher band only taxes the extra naira at the higher rate, so a raise never reduces your take-home pay.
What you can deduct before tax
Section 30 of the Nigeria Tax Act lists “eligible deductions” that reduce your chargeable income. They include:
- Your contributions under the Pension Reform Act (normally 8% of basic, housing and transport pay).
- Contributions to the National Housing Fund (NHF).
- Contributions to the National Health Insurance Scheme.
- Interest on a loan for building your own owner-occupied home.
- Life insurance or deferred annuity premiums for you or your spouse.
- Rent relief: 20% of annual rent paid, capped at ₦500,000.
Deductions must be claimed in writing with supporting documents. For rent relief, the DLA Piper FAQ notes that employers may ask for a receipt or tenancy agreement, the landlord’s details and the property address. If you pay rent, give your HR or payroll team this evidence early, otherwise your PAYE may be calculated without the relief.
How to calculate your PAYE: step by step
- Find your annual gross pay. Monthly gross × 12, plus any taxable bonuses or allowances.
- Subtract eligible deductions: pension, NHF, NHIS, life insurance and rent relief.
- The result is your chargeable income.
- Apply the bands slice by slice.
- Divide the annual tax by 12 for your monthly PAYE.
In the examples below we make simplifying assumptions: pension is 8% of the full gross salary (as if all pay is basic, housing and transport), there is no NHF or insurance, and the employee pays the stated rent. Your payroll may differ.
Example 1: ₦100,000 per month, rent ₦360,000 a year
| Annual gross | ₦1,200,000 |
| Less pension (8%) | −₦96,000 |
| Less rent relief (20% × ₦360,000) | −₦72,000 |
| Chargeable income | ₦1,032,000 |
| First ₦800,000 at 0% | ₦0 |
| Remaining ₦232,000 at 15% | ₦34,800 |
| Annual PAYE | ₦34,800 (₦2,900/month) |
Without the rent relief claim, chargeable income would be ₦1,104,000 and PAYE would be ₦45,600 a year (₦3,800 a month).
Example 2: ₦200,000 per month, rent ₦600,000 a year
| Annual gross | ₦2,400,000 |
| Less pension (8%) | −₦192,000 |
| Less rent relief (20% × ₦600,000) | −₦120,000 |
| Chargeable income | ₦2,088,000 |
| First ₦800,000 at 0% | ₦0 |
| Remaining ₦1,288,000 at 15% | ₦193,200 |
| Annual PAYE | ₦193,200 (₦16,100/month) |
Example 3: ₦500,000 per month, rent ₦1,500,000 a year
| Annual gross | ₦6,000,000 |
| Less pension (8%) | −₦480,000 |
| Less rent relief (20% × ₦1.5m = ₦300,000) | −₦300,000 |
| Chargeable income | ₦5,220,000 |
| First ₦800,000 at 0% | ₦0 |
| Next ₦2,200,000 at 15% | ₦330,000 |
| Remaining ₦2,220,000 at 18% | ₦399,600 |
| Annual PAYE | ₦729,600 (₦60,800/month) |
Notice the rent relief cap: someone paying ₦3,000,000 rent would still only get ₦500,000 relief, because 20% of ₦3m (₦600,000) is above the cap.
Who collects your PAYE?
Your employer deducts PAYE from your salary and remits it to the tax authority of the state where you are resident. If you work for a company, you usually do not need to file monthly yourself, but you should keep payslips and check that the deductions look right. If you also earn income from a side business, that income may need to be declared separately.
How to check your payslip
- Confirm the gross figure matches your contract.
- Check that pension is about 8% of basic, housing and transport pay, and that it appears in your RSA statement from your PFA.
- Ask HR whether rent relief has been applied, and what evidence they need.
- Re-run the calculation above with your numbers. If the PAYE is very different, ask payroll for a breakdown.
Common questions
Does the new law mean I pay less tax?
For many low and middle earners, yes, mainly because of the ₦800,000 tax-free band. DLA Piper notes that staff earning roughly ₦100,000 to ₦500,000 a month will generally see deductions fall compared with the old system, though outcomes vary with individual reliefs. High earners may pay more because the CRA was removed and the top rate rose to 25%.
I live in a family house and pay no rent. Can I claim rent relief?
No. The relief is based on rent you actually pay, and you must declare it accurately.
Are bonuses and 13th-month pay taxed?
Generally they form part of your taxable employment income and are added to your annual gross. Ask your payroll team how they spread the tax.
Frequently asked questions
Is the ₦800,000 tax-free amount applied monthly?
It is an annual band. Payroll systems typically spread it across the year, which is roughly ₦66,667 of chargeable income per month taxed at 0%.
Does NHF reduce my tax?
Yes. National Housing Fund contributions are listed as an eligible deduction under section 30 of the Nigeria Tax Act 2025, so they reduce chargeable income if you contribute.
What if I have two jobs?
Your total employment income is what matters for the bands. Each employer may deduct PAYE as if it were your only job, so you could be under- or over-taxed. Speak to your state tax authority or a tax professional.
I’m self-employed. Do these bands apply to me?
The same personal income tax bands apply to individuals, but self-employed people generally pay through self-assessment rather than PAYE, and different expenses may be deductible.
Where can I read the law itself?
The National Assembly hosts the Nigeria Tax Act 2025 document, linked at the top of this article. Professional firms like PwC also publish plain-language summaries.
Plan your budget around net pay
Once you know your monthly PAYE and pension, you know your true take-home pay, and that is the figure your budget should use. Our ₦100k/₦200k budgeting guide shows how to plan from there. If you want a spreadsheet that separates gross pay, deductions and spending categories, the Nigerian Salary Budget Planner is one option.
This guide is general information based on the sources linked above and is not tax advice. Tax rules and their interpretation by state tax authorities can change. Confirm your position with your employer’s payroll, your state Internal Revenue Service or a qualified tax professional.
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