From 1 January 2026, PAYE in Nigeria follows the Nigeria Tax Act 2025. The first ₦800,000 of chargeable income a year is tax-free, the rest is taxed in bands from 15% to 25%, the old Consolidated Relief Allowance (CRA) is replaced by rent relief (20% of rent, up to ₦500,000), and staff earning ₦70,000 a month or less pay no PAYE.
For most of your team the change is small. Those who claim rent relief pay less, and high earners pay more: about ₦15,000 more a month on ₦2,000,000.
1. What the Nigeria Tax Act 2025 is
The Nigeria Tax Act 2025 is one of four tax reform laws signed by President Bola Tinubu in June 2025, alongside the Nigeria Tax Administration Act, the Nigeria Revenue Service (Establishment) Act and the Joint Revenue Board (Establishment) Act. Together they replace a patchwork of older laws, including the Personal Income Tax Act, with one tax code.
For a founder, the part you touch every month is PAYE: the tax you deduct from salaries and remit to each staff member's state tax office. That's what this guide covers.
2. The new PAYE bands (from January 2026)
| Chargeable income a year | Rate |
|---|---|
| First ₦800,000 | 0% |
| Next ₦2,200,000 (to ₦3,000,000) | 15% |
| Next ₦9,000,000 (to ₦12,000,000) | 18% |
| Next ₦13,000,000 (to ₦25,000,000) | 21% |
| Next ₦25,000,000 (to ₦50,000,000) | 23% |
| Above ₦50,000,000 | 25% |
Chargeable income is gross pay minus pension (8%), NHF if the staff member contributes (2.5% of basic) and reliefs. Each band's rate applies only to the income inside it, so a raise never reduces take-home pay.
3. Reliefs and exemptions
- Rent relief replaces CRA. 20% of the rent a staff member pays a year, up to ₦500,000, comes off their income before tax. The old CRA (₦200,000 or 1% of gross, plus 20% of gross) no longer applies.
- Other reliefs: health insurance contributions, interest on a loan for an owner-occupied home, and life assurance premiums.
- The minimum-wage exemption: staff earning ₦70,000 a month or less pay no PAYE.
- Loss of employment: compensation for loss of employment is tax-free up to ₦50 million, up from ₦10 million. Useful to know if you ever have to let someone go. See the termination guide.
Our view: ask every staff member about rent when they join, and again each year. It's a two-minute conversation, and for many of your team it's the difference between paying more tax and paying less.
4. Old PAYE vs new PAYE: who pays more?
Monthly PAYE on the same salary, before and after the Act:
| Monthly gross | PAYE in 2025 (old law) | PAYE in 2026, no rent relief | PAYE in 2026, ₦1.2m rent a year |
|---|---|---|---|
| ₦100,000 | ₦5,300 | ₦3,800 | ₦800 |
| ₦150,000 | ₦10,700 | ₦10,700 | ₦7,700 |
| ₦200,000 | ₦17,527 | ₦17,600 | ₦14,600 |
| ₦300,000 | ₦32,527 | ₦32,180 | ₦28,580 |
| ₦500,000 | ₦65,067 | ₦65,300 | ₦61,700 |
| ₦1,000,000 | ₦151,467 | ₦148,100 | ₦144,500 |
| ₦2,000,000 | ₦323,467 | ₦338,900 | ₦334,700 |
| ₦5,000,000 | ₦834,667 | ₦977,500 | ₦972,500 |
What it shows:
- Lower earners pay less, and anyone on ₦70,000 a month or less pays nothing.
- The middle barely moves without rent relief. Losing CRA roughly cancels out the new 0% band. Rent relief is what makes the difference.
- High earners pay more, because of the 25% top rate and the loss of CRA.
Worked out with WadataHR's payroll engine, which keeps both the old Personal Income Tax Act rules and the new rules: a steady monthly salary, pension on the whole gross, no NHF, and no reliefs except the rent shown. Checked 19 October 2026. See any salary in the take-home pay calculator.
WadataHR applies the 2026 bands, rent relief and other reliefs (each recorded with evidence) and the minimum-wage exemption on every run, while runs from before 2026 keep the rules they were worked out under. Free for up to 5 staff.
5. What stays the same for employers
- Deduct PAYE every payday and remit it to the state tax office of each staff member's state of residence, such as LIRS in Lagos.
- Remit by the 10th of the month after you pay salaries.
- File the annual PAYE return for the year before by 31 January.
- Pension and NHF still come off before PAYE is worked out.
- The Federal Inland Revenue Service is now the Nigeria Revenue Service (NRS). PAYE on employees is still collected by the states.
6. What to do now
- Check January's payroll onwards was run on the new bands, not the old ones. If not, correct it in the next run.
- Collect rent details from staff who rent, with a tenancy agreement or receipts, and apply the relief.
- Talk to your high earners. Their take-home may have dropped. Telling them before they notice it is how you keep trust.
- Set new salaries on take-home, not just gross, so offers mean what candidates think they mean.
Nigeria Tax Act 2025 questions
When does the Nigeria Tax Act 2025 take effect?
On 1 January 2026. Payroll for January 2026 onwards uses the new PAYE bands and reliefs. Payroll for earlier months stays on the old Personal Income Tax Act rules.
What are the new PAYE tax bands in Nigeria?
On chargeable income a year: 0% on the first ₦800,000, 15% on the next ₦2,200,000, 18% on the next ₦9,000,000, 21% on the next ₦13,000,000, 23% on the next ₦25,000,000, and 25% above ₦50,000,000.
Is the first ₦800,000 tax-free?
Yes, the first ₦800,000 of chargeable income a year is taxed at 0%. Chargeable income is what's left after pension, NHF and reliefs, so many people earning more than ₦800,000 a year still pay little or no PAYE. Staff earning ₦70,000 a month or less pay none at all.
What replaced the Consolidated Relief Allowance?
Rent relief: 20% of the rent an employee pays a year, up to ₦500,000, deducted before tax. Health insurance contributions, home loan interest and life assurance premiums are also reliefs.
Will my staff pay more or less tax in 2026?
Lower earners pay less, and anyone on ₦70,000 a month or less pays nothing. Middle earners pay about the same unless they claim rent relief, which lowers their tax. High earners pay more: on ₦2,000,000 a month, about ₦15,000 more.
Is compensation for loss of employment taxed?
Under the Nigeria Tax Act 2025, compensation for loss of employment is exempt up to ₦50 million, up from ₦10 million under the old law.
Who collects PAYE now that FIRS is the Nigeria Revenue Service?
PAYE on employees is still remitted to the state tax office of each employee's state of residence, by the 10th of the following month. The Nigeria Revenue Service replaced FIRS for federal taxes.
Related guides and tools
Run payroll under the new law, without the spreadsheet.
WadataHR works out PAYE, pension, NHF and NSITF for every staff member, prepares the schedules for each state tax office, and reminds you before each deadline. Free for up to 5 staff.
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