Nigeria Tax Act 2025: how your salary is taxed from 2026
Since 1 January 2026, the first ₦800,000 of income is tax-free, the consolidated relief allowance is gone and rent relief has arrived. Here is what that means for your pay.
The Nigeria Tax Act 2025 rewrote personal income tax from 1 January 2026. The tax bands are wider, the top rate is lower at 25%, and the consolidated relief allowance (CRA) has been replaced by a new rent relief. For most salary earners, that means PAYE is calculated very differently from before. This guide explains how your salary is taxed under the Nigeria Tax Act 2025, what you can deduct, and how much PAYE you pay, with worked examples.
The new annual tax bands
Under the Nigeria Tax Act, personal income tax is charged on taxable income in these annual bands:
- First ₦800,000: 0%
- Next ₦2,200,000 (to ₦3 million): 15%
- Next ₦9,000,000 (to ₦12 million): 18%
- Next ₦13,000,000 (to ₦25 million): 21%
- Next ₦25,000,000 (to ₦50 million): 23%
- Above ₦50 million: 25%
The first ₦800,000 of taxable income is tax-free, and employees earning the national minimum wage or less no longer have PAYE deducted at all. Each rate applies only to the slice of income inside its band.
What you can deduct before tax
Pension. Your 8% contribution under the Pension Reform Act, worked out on basic salary, housing and transport allowances, is deductible. Your employer adds at least 10% to your retirement savings account; see our guide to the contributory pension scheme in Nigeria.
National Housing Fund. If you contribute 2.5% of basic salary to the National Housing Fund, that amount is deductible.
Rent relief. This is the main new relief. You can deduct 20% of the rent you pay in the year, up to a maximum of ₦500,000. You must declare the rent accurately, and your employer or tax authority may ask for evidence such as a tenancy agreement or receipts.
Other deductions. NHIS contributions, life insurance premiums and interest on a loan for your own home are also deductible.
Worked PAYE examples for 2026
All examples are yearly and assume an 8% pension contribution on the full salary.
Salary of ₦3,000,000 a year. Pension is ₦240,000, leaving taxable income of ₦2,760,000. PAYE is ₦294,000, which is 15% of the ₦1,960,000 above the tax-free ₦800,000. Take-home pay is ₦2,466,000, or about ₦205,500 a month.
Salary of ₦6,000,000 a year. Pension is ₦480,000 and PAYE is ₦783,600, leaving take-home pay of ₦4,736,400. If you pay ₦1,200,000 a year in rent, rent relief of ₦240,000 cuts PAYE to ₦740,400.
Salary of ₦12,000,000 a year with ₦2,400,000 rent. Pension is ₦960,000 and rent relief is ₦480,000, giving PAYE of ₦1,690,800 and take-home pay of ₦9,349,200.
Our calculator applies pension to your full gross pay. If part of your pay is not basic, housing or transport, your pension contribution will be a little lower and PAYE a little higher. Try your own salary with our Nigeria PAYE calculator.
Who gains under the Nigeria Tax Act
Most low and middle earners pay less PAYE than before, mainly because of the ₦800,000 tax-free band and the wider lower bands. High earners can pay more, because the old consolidated relief allowance, which grew with income, has gone. Renters gain the most from the new rules, as long as they claim rent relief.
Who collects your PAYE
PAYE on employment income is collected by the tax authority of the state where you live, through your employer, who deducts it monthly and remits it. Make sure your employer has your correct tax identification number and state of residence, so that your tax is credited properly.
How to make the most of the new rules
If you rent your home, keep your tenancy agreement and rent receipts so you can claim rent relief. Check that your pension contributions are reaching your retirement savings account each month. If your take-home pay has risen under the new bands, consider saving the difference; our guide on protecting your savings from inflation in Nigeria explains options.
Frequently asked questions
What is the tax-free income under the Nigeria Tax Act 2025?
The first ₦800,000 of annual taxable income is taxed at 0%.
Has the consolidated relief allowance been removed?
Yes. From 2026 the CRA no longer applies, and rent relief of up to ₦500,000 is available instead.
What is the top income tax rate in Nigeria now?
25%, on taxable income above ₦50 million a year.
Sources
This article is general information, not financial advice.