PAYE in Nigeria: New Tax Bands and What You Pay on Your Salary

If you earn ₦800,000 a year or less in Nigeria, you no longer pay any income tax. That's the biggest change in the new PAYE system that started on 1 January 2026.

Above that, tax rises in steps from 15% to 25% on the highest earners. If your payslip still shows the old rates, raise it with HR. Below are the new bands, with worked examples for different salaries.

The new PAYE tax bands

The Consolidated Relief Allowance (CRA) is gone. In its place, the first ₦800,000 of your chargeable income is simply exempt, and the bands above it are wider and, for most people, lower than before.

These are the rates confirmed in KPMG's flash alert on the reform, PwC's Nigeria tax summary and payroll provider Mercans' statutory alert, checked in September 2026. The NTA was signed on 26 June 2025 and took effect on 1 January 2026, alongside the renaming of the Federal Inland Revenue Service (FIRS) to the Nigeria Revenue Service (NRS).

How to calculate your PAYE, step by step

1. Find your gross annual income. Add up your basic salary, housing allowance, transport allowance and any other regular allowances, then multiply by 12. Add annual bonuses or commissions if they're guaranteed.
2. Deduct your pension contribution. Under the Pension Reform Act, you contribute 8% of your basic salary, housing allowance and transport allowance, not your full gross pay, to your Retirement Savings Account, and your employer adds another 10% on top. Only your 8% reduces your taxable income, and it's deducted before tax is worked out. If your employer also deducts 2.5% for the National Housing Fund (NHF), that's deductible too.
3. Deduct rent relief, if you're claiming it. It's the lower of ₦500,000 or 20% of the rent you paid that year. You need a tenancy agreement, rent receipts and your landlord's details to claim it. It isn't applied automatically.
4. Apply the bands above to what's left. That's your chargeable income. Tax the first ₦800,000 at 0%, the next slice at 15%, and so on up the table.
5. Divide by 12 to get the monthly PAYE your employer should withhold.

Say you're paid ₦300,000 a month with no other allowances (so your pension is worked out on the full amount) and you're not claiming rent relief. Your yearly gross is ₦3,600,000. Pension takes 8%, or ₦288,000 a year (₦24,000 a month), leaving ₦3,312,000 to tax. The first ₦800,000 is tax-free, and the other ₦2,512,000 falls in the 15% and 18% bands, giving yearly tax of ₦386,160, or about ₦32,180 a month. Your take-home pay comes to roughly ₦243,820 a month.

What you take home: worked examples

These assume no other allowances beyond basic, housing and transport (so pension is 8% of the full gross), and no rent relief claimed, unless stated. Run your own numbers, including bonuses and rent relief, through our Nigeria PAYE calculator.

Claiming rent relief changes the numbers a little. Take the ₦500,000-a-month earner: if they pay ₦1.2 million a year in rent and can prove it, the relief is capped at ₦500,000, but 20% of ₦1.2 million is only ₦240,000, so that's what they get. Their taxable income falls by ₦240,000, monthly PAYE drops to about ₦61,700, and take-home rises to roughly ₦398,300. That's an extra ₦3,600 a month for filling in a form. It's worth doing, but it won't transform your finances.

Do you pay tax if you earn Nigeria's minimum wage?

No. Nigeria's national minimum wage is ₦70,000 a month, and the NTA specifically exempts anyone earning at or below the national minimum wage from PAYE, on top of the general ₦800,000 tax-free band. So if your gross pay is ₦70,000 a month or less, your employer should not be deducting any income tax at all.

How do you claim rent relief on your Nigeria PAYE?

Rent relief replaced the old Consolidated Relief Allowance, and it isn't automatic. To get it, give your employer's payroll or HR team:

1. Your tenancy agreement.
2. Your rent receipts for the year.
3. Your landlord's name, contact details and Tax Identification Number (TIN) or National Identification Number (NIN), where required.

Your relief is the lower of ₦500,000 or 20% of the rent you paid. If you own your home or live rent-free, you can't claim it. There's no similar relief for homeowners under the new rules.

Payslip problems to look out for

• Your employer hasn't updated payroll yet. Some smaller employers were still using 2025 payroll rules months after the change. If your payslip shows the old bands or a Consolidated Relief Allowance line, ask HR when they're switching. You may be owed a refund for tax you overpaid.
• Mixing up the 4% Development Levy with personal tax. This levy replaced the old education tax, NITDA levy and NASENI levy, but it's charged on company profits, not taken from your salary. If someone says it's a new PAYE charge on employees, they're wrong. If you also run a business, see our full rundown of Nigeria's 2026 tax law changes: the Development Levy and the small-company tax exemption work differently from PAYE.
• Claiming rent relief without paperwork. Payroll can't apply rent relief on your word alone. Keep your tenancy agreement and receipts from the start of the tenancy, not just at tax time.
• Assuming pension is 8% of your full salary. It's 8% of basic, housing and transport only. If your payslip has a large "other allowances" or bonus line, your actual pension deduction, and therefore your tax-free pension relief, will be smaller than 8% of your gross pay.
• No health insurance line on your payslip. Employers with 5 or more staff must provide HMO cover under the NHIA Act. If yours doesn't deduct for it, ask HR whether you're enrolled.

If you earn freelance or foreign-currency income rather than a salary, PAYE doesn't work the same way. See our guide on how to withdraw money from PayPal in Nigeria if that's you. Once you know your real monthly take-home, decide what to do with it: even modest earners can build savings with a plan, as we cover in how to save for land on a low salary. For somewhere short-term and government-backed, see our guide on buying Treasury bills in Nigeria. Prefer a shared fund with a lower minimum? Compare the best money market funds in Nigeria for current yields.

For more on managing money in Nigeria, see our Nigeria money guides.

Frequently asked questions

What is the new PAYE tax rate in Nigeria?

Nigeria uses six bands from 1 January 2026: 0% on the first ₦800,000 of annual chargeable income, then 15%, 18%, 21%, 23% and 25% as income rises, with the top rate applying above ₦50 million a year.

Has the Consolidated Relief Allowance (CRA) been removed?

Yes. The CRA is gone under the Nigeria Tax Act 2025. It's been replaced by the ₦800,000 tax-free band plus a separate rent relief of up to ₦500,000 for tenants who can document their rent.

Is pension deducted before or after PAYE tax in Nigeria?

Before. Your 8% employee pension contribution, calculated on basic salary plus housing and transport allowances, is deducted from your gross income before the PAYE bands are applied, which lowers your tax bill.

Do freelancers and business owners pay PAYE in Nigeria?

No. PAYE is deducted by an employer from employment income. Freelancers, contractors and business owners pay personal income tax directly through self-assessment, using the same 2026 bands, rather than having it withheld monthly by an employer.

Is FIRS still in charge of PAYE in Nigeria?

Not by that name. The Federal Inland Revenue Service (FIRS) has been renamed the Nigeria Revenue Service (NRS) as part of the same reform, and PAYE administration now falls under the NRS alongside state internal revenue services for the state-level portion of the tax.