PAYE in Nigeria 2026: New Tax Bands and What You Pay on Your Salary

Nigeria's Pay As You Earn (PAYE) system changed on 1 January 2026 under the Nigeria Tax Act (NTA) 2025. The first ₦800,000 of your annual income is now tax-free, up from the old system where tax started on the first naira. Above that, you pay 15% on the next ₦2.2 million, 18% on the next ₦9 million, 21% on the next ₦13 million, 23% on the next ₦25 million, and 25% on anything over ₦50 million a year. As of September 2026, employers should already be applying these bands — if your payslip still shows the old rates, that's worth flagging to HR. Other African countries structure PAYE differently but follow the same principle of taxing income after statutory deductions — see how Tanzania calculates PAYE after its NSSF contribution comes off first, if you're comparing take-home pay across the region.

The new PAYE tax bands for 2026

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. This is the lower of ₦500,000 or 20% of the rent you actually 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 calculated on the full amount) and you're not claiming rent relief. Your annual gross is ₦3,600,000. Pension takes 8%, or ₦288,000 a year (₦24,000 a month), leaving ₦3,312,000 chargeable. The first ₦800,000 is tax-free; the remaining ₦2,512,000 falls entirely in the 15% and 18% bands, giving annual tax of ₦386,160 — about ₦32,180 a month. Your take-home pay works out to roughly ₦243,820 a month.

What you actually 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 that ₦500,000-a-month earner: if they pay ₦1.2 million a year in rent and can document it, their rent relief is capped at ₦500,000, but 20% of ₦1.2 million is only ₦240,000 — so that's the relief they get. Their taxable income drops by ₦240,000, monthly PAYE falls 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, which is worth doing but 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 outright or live rent-free, you can't claim it — there's no equivalent relief for homeowners under the new rules.

What to watch out for

• Your employer hasn't updated payroll yet. Some smaller employers were still running 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 over — you may be owed a refund for overpaid tax.
• Confusing 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 deducted from your salary. If someone tells you it's a new PAYE charge on employees, that's wrong. See our full rundown of Nigeria's 2026 tax law changes if you also run a business alongside your salary — the Development Levy and the small-company tax exemption work differently from PAYE.
• Rent relief without paperwork. Payroll cannot apply rent relief on your word alone. Keep your tenancy agreement and receipts from day one 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 are required to provide HMO cover under the NHIA Act — if yours doesn't deduct for it, ask HR whether you're actually enrolled.

For freelance or foreign-currency income instead of a salary, PAYE doesn't apply the same way — see our guide on how to withdraw money from PayPal in Nigeria if that's your situation. And once you know your real monthly take-home, it's worth deciding what to do with it: even modest earners can build up savings with a plan, as we cover in how to save for land on a low salary. If you'd rather put some of that take-home somewhere short-term and government-backed instead, see our guide on buying Treasury bills in Nigeria. Prefer a pooled fund with a lower minimum instead of a single bill? 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 for 2026?

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.