From 1 January 2026, personal income tax in Nigeria works differently. The Nigeria Tax Act 2025 replaced the old system with simpler bands, a bigger tax-free threshold and a new relief for people who pay rent. If you're paid through PAYE, your payslip has probably already changed.
Here's what you need to know, in plain English.
Free toolNigeria PAYE Tax CalculatorWork out your exact take-home pay under the new rules.The new tax bands
Tax is charged on your taxable income, meaning your pay after allowable deductions. Each rate applies only to the slice of income within its band:
| Annual taxable income | Rate |
|---|---|
| First ₦800,000 | 0% |
| Next ₦2,200,000 | 15% |
| Next ₦9,000,000 | 18% |
| Next ₦13,000,000 | 21% |
| Next ₦25,000,000 | 23% |
| Above ₦50,000,000 | 25% |
The biggest change for lower earners is the ₦800,000 tax-free band. Employees earning no more than the national minimum wage are no longer liable to PAYE at all.
What happened to the Consolidated Relief Allowance?
The Consolidated Relief Allowance (CRA) has been removed. In its place, the law widened the 0% band and introduced rent relief.
How rent relief works
If you pay rent on your home, you can deduct 20% of your annual rent, up to a maximum of ₦500,000.
- Rent of ₦1,000,000 a year gives relief of ₦200,000.
- Rent of ₦3,000,000 a year gives the maximum relief of ₦500,000.
Other deductions that still reduce your tax
These are deducted before your tax is calculated:
- Pension contributions under the national pension scheme (employees contribute at least 8%)
- National Housing Fund contributions
- National Health Insurance Scheme contributions
- Life assurance premiums
- Interest on a loan to build or buy your own home
A worked example
Take an employee earning ₦6,000,000 a year who contributes 8% to their pension and pays ₦1,200,000 a year in rent.
- Pension: 8% of ₦6,000,000 = ₦480,000
- Rent relief: 20% of ₦1,200,000 = ₦240,000
- Taxable income: ₦6,000,000 − ₦480,000 − ₦240,000 = ₦5,280,000
Now apply the bands:
- First ₦800,000 at 0% = ₦0
- Next ₦2,200,000 at 15% = ₦330,000
- Remaining ₦2,280,000 at 18% = ₦410,400
Total tax: ₦740,400 a year, or about ₦61,700 a month. That's an effective rate of around 12% of gross pay.
What should you do now?
- Check your payslip to see that your employer is applying the new bands.
- Tell HR about your rent so rent relief can be applied through PAYE.
- Review your pension contributions, which reduce your tax.
Sources: Nigeria Tax Act 2025; PwC Worldwide Tax Summaries: Nigeria.
