PAYE Tax Rate in Nigeria (2026 Guide)
The rules changed on 1 January 2026. If your accountant, HR software, or that blog post from 2024 is still quoting rates like 7%, 11%, and 24%, those numbers are dead. The Nigeria Tax Act 2025 (NTA 2025) replaced the Personal Income Tax Act (PITA) effective 1 January 2026.
This guide gives you the correct PAYE tax rate in Nigeria for 2026, with worked examples, a full band table, and the steps to calculate what actually leaves your employees’ accounts each month.
Quick Answer
Under the NTA 2025 Sixth Schedule, the PAYE bands for 2026 run from 0% on the first ₦800,000 of annual chargeable income up to 25% on income above ₦50,000,000. Subtract pension, NHF (where applicable), and rent relief from gross income first. Then apply the bands to what’s left, and divide by 12 for the monthly deduction.
What You’ll Need
For employees:
- Annual gross emoluments (Basic + Housing + Transport + Other Allowances)
- Monthly pension contribution amount (8% of Basic + Housing + Transport)
- Rent receipt if claiming rent relief
- NHF opt-in status
For employers/HR:
- Employee salary breakdown by component
- PFA remittance records
- LIRS/SIRS employer registration
Estimated time to compute: 10–15 minutes per employee manually. Under 60 seconds with payroll software.
The 2026 PAYE Tax Bands (NTA 2025)
This is the table that counts. Print it, save it, share it with your accountant.
| Annual Chargeable Income | Rate | What This Means |
|---|---|---|
| First ₦800,000 | 0% | Tax-free threshold |
| Next ₦2,200,000 (₦800,001 – ₦3,000,000) | 15% | First taxed band |
| Next ₦9,000,000 (₦3,000,001 – ₦12,000,000) | 18% | Mid-range |
| Next ₦13,000,000 (₦12,000,001 – ₦25,000,000) | 21% | Upper-mid |
| Next ₦25,000,000 (₦25,000,001 – ₦50,000,000) | 23% | High earners |
| Above ₦50,000,000 | 25% | Top band |
The old bands (7%, 11%, 15%, 19%, 21%, 24%) are gone. If you are reaching for a 7%/11%/15%/19%/21%/24% band structure, stop. That is the old PITA regime and is no longer in effect.
How to Calculate PAYE Tax in Nigeria: Step by Step
Step 1: Add Up Annual Gross Emoluments
Compute annual gross emoluments: Basic + Housing + Transport + Other Allowances.
Most employers split salary into components. Add them all up and multiply by 12 if you’re working from monthly figures.
Example: Chidera earns:
- Basic: ₦200,000/month
- Housing: ₦80,000/month
- Transport: ₦50,000/month
- Other: ₦20,000/month
- Monthly gross: ₦350,000 → Annual gross: ₦4,200,000
Step 2: Deduct Pension (Employee Contribution)
Employee pension contribution is 8% of Basic + Housing + Transport (not gross salary).
Chidera’s pensionable emoluments = ₦200,000 + ₦80,000 + ₦50,000 = ₦330,000/month → ₦3,960,000/year
Annual pension deduction = 8% × ₦3,960,000 = ₦316,800
Pro tip: A common mistake is computing pension on gross salary (including “Other Allowances”). Pension is calculated on Basic + Housing + Transport only, not gross salary. Running it on full gross inflates the deduction and can cause issues with your PFA.
Step 3: Apply Rent Relief (If Applicable)
The rent relief under NTA 2025 is 20% of annual rent paid by the employee, capped at ₦500,000 per year. The employee files for relief, and the employer applies it to the PAYE computation.
If Chidera pays ₦600,000/year in rent: 20% × ₦600,000 = ₦120,000 rent relief.
If Chidera pays ₦3,000,000/year in rent: relief is capped at ₦500,000.
Chidera’s rent relief = ₦120,000 (assuming ₦600,000 annual rent)
Pro tip: The old Consolidated Relief Allowance (CRA), formerly ₦200,000 + 20% of gross income, does NOT apply from 2026 onward. If your payroll software still has a CRA line, raise it with your provider immediately.
Step 4: Calculate Chargeable Income
Subtract statutory deductions (employee pension, NHF, NHIS where applicable) and reliefs (rent relief) from gross to arrive at chargeable income.
Chidera’s chargeable income:
- Annual gross: ₦4,200,000
- Less pension: ₦316,800
- Less rent relief: ₦120,000
- Chargeable income: ₦3,763,200
Step 5: Apply the PAYE Bands
Apply the bands to the chargeable income on an annual basis.
Chidera’s chargeable income is ₦3,763,200. Here’s how the tax applies:
| Band | Amount in Band | Rate | Tax |
|---|---|---|---|
| First ₦800,000 | ₦800,000 | 0% | ₦0 |
| Next ₦2,200,000 | ₦2,200,000 | 15% | ₦330,000 |
| Remainder (₦763,200) | ₦763,200 | 18% | ₦137,376 |
| Total Annual PAYE | ₦467,376 |
Step 6: Divide by 12 for Monthly Deduction
Divide the annual PAYE by 12 to get the monthly deduction.
Chidera’s monthly PAYE = ₦467,376 ÷ 12 = ₦38,948
So on a ₦350,000 gross monthly salary, Chidera’s take-home (before other deductions) is roughly:
₦350,000 − ₦38,948 (PAYE) − ₦26,400 (pension) = ₦284,652/month
Worked Example 2: How Much Tax on a ₦500,000 Monthly Salary?
This one comes up constantly. Here’s the clean answer.
Monthly gross: ₦500,000 → Annual gross: ₦6,000,000
Assume a typical split: Basic ₦250,000 / Housing ₦125,000 / Transport ₦75,000 / Other ₦50,000.
Pension base: ₦250,000 + ₦125,000 + ₦75,000 = ₦450,000/month → ₦5,400,000/year
Annual pension (8%): ₦432,000
Rent relief: assume ₦800,000/year rent → 20% = ₦160,000
Chargeable income: ₦6,000,000 − ₦432,000 − ₦160,000 = ₦5,408,000
| Band | Amount | Rate | Tax |
|---|---|---|---|
| First ₦800,000 | ₦800,000 | 0% | ₦0 |
| Next ₦2,200,000 | ₦2,200,000 | 15% | ₦330,000 |
| Remainder ₦2,408,000 | ₦2,408,000 | 18% | ₦433,440 |
| Annual PAYE | ₦763,440 | ||
| Monthly PAYE | ₦63,620 |
Monthly take-home (before NHF): ₦500,000 − ₦63,620 − ₦36,000 (pension) ≈ ₦400,380
Other Deductions That Affect Take-Home
Pension (PRA 2014)
Employee rate: 8% of Basic + Housing + Transport. Employer rate: 10% of the same base. Payment is due within 7 working days of salary payment.
NHF (National Housing Fund)
Under the Business Facilitation Act 2022, private-sector employees can opt out of NHF. Treat it as opt-in per employee, not a default deduction. Where applicable, the rate is 2.5% of gross monthly salary.
Health Insurance (NHIA 2022)
Health insurance premiums are paid to HMOs on plan-based pricing. There is no longer a single statutory formula. Premiums vary by the plan chosen. If anyone quotes you “5% employee + 10% employer of basic” as a current rule, that’s outdated.
PAYE Remittance: When Is It Due?
PAYE must be paid by the 10th day of the month following the month of deduction.
So April salaries → PAYE due by 10 May.
Annual employer returns (Form H1) are due by 31 January for the prior tax year. Individual annual tax returns are due by 31 March for the prior tax year.
Missing the 10th of the month triggers penalty interest from the Nigeria Revenue Service (formerly FIRS). The Federal Inland Revenue Service has transitioned to The Nigeria Revenue Service.
Cost Breakdown: Running Payroll Manually vs. Lint
Here’s what it actually costs to run payroll in Nigeria right now.
| Item | Manual / Accountant | Lint Payroll |
|---|---|---|
| PAYE computation | ₦500–₦5,000/employee | — |
| Pension calculation | Included | — |
| Payslip generation | Extra | — |
| PAYE remittance filing | Extra | — |
| Total per employee | Variable | ₦500/employee per run |
Lint Payroll costs ₦500 per employee per payroll run. That flat fee covers PAYE computation, pension, NHF, payslips, remittance, and salary advances.
Bank transfers to employees on external banks cost ₦40, free if the employee has a Lint account.
For a team of 10 employees, that’s ₦5,000 per payroll run. One PAYE error that triggers a NRS query costs a lot more than that.
Common PAYE Mistakes Nigerian Business Owners Make
These aren’t judgment calls. They’re just the patterns that show up when audit prep starts. If any of these look familiar, you’re in good company.
1. Still using the old PITA bands
The 7%–24% structure is gone. The old PITA bands were replaced effective 2026-01-01. Any payroll software still running old bands is computing wrong deductions every month.
2. Including CRA in 2026 calculations
The Consolidated Relief Allowance (CRA), formerly ₦200,000 + 20% of gross income, does not apply from 2026 onward. It was replaced by the ₦800,000 zero-rate band and the rent relief.
3. Computing pension on gross salary
Pension is calculated on Basic + Housing + Transport, not on the full gross. Including “Other Allowances” in the pension base is a silent error that compounds monthly.
4. Treating gratuity as tax-exempt
Under PITA, gratuity was tax-exempt. Not anymore. Gratuity is now taxable under NTA 2025. Factor it into chargeable income and flag it with your accountant before year-end.
5. Remitting late, even by a day
The 10th is the 10th. PAYE is due by the 10th day of the month following the month of deduction. If salary goes out on the 28th, PAYE is due by the 10th of next month, not the 28th.
6. Applying NHIS as a flat 15% of basic
There is no longer a single statutory “5% employee + 10% employer of basic” formula. Health insurance is now HMO-plan-based. If your payroll still uses a flat NHIS rate, recalculate.
FAQs
How much is the current PAYE tax rate in Nigeria?
The 2026 PAYE bands under the NTA 2025 Sixth Schedule run from 0% on the first ₦800,000 of annual chargeable income, to 25% on income above ₦50,000,000. There is no single flat rate. It’s progressive.
Has the PAYE rate changed for 2026?
Yes, significantly. The Nigeria Tax Act 2025 replaced the Personal Income Tax Act (PITA) effective 1 January 2026. The old rates of 7%, 11%, 19%, and 24% no longer apply. The new lowest taxed band is 15% (after the 0% threshold). The top rate moved from 24% to 25%.
What is the tax-free threshold in Nigeria for 2026?
The first ₦800,000 of annual chargeable income is taxed at 0%, roughly ₦66,667/month. This replaced the old Consolidated Relief Allowance.
How is PAYE calculated on salary in Nigeria in 2026?
Four steps: (1) add up all salary components annually, (2) subtract employee pension (8% of Basic + Housing + Transport) and rent relief (20% of annual rent, capped at ₦500,000), (3) apply the progressive NTA 2025 bands to the chargeable income, and (4) divide the annual PAYE by 12.
Who is responsible for remitting PAYE in Nigeria?
The employer. You deduct PAYE from employee salaries and pay it to the relevant State Internal Revenue Service by the 10th of the following month. Individual employees do not remit their own PAYE. That’s your obligation as the employer.
What is the deadline to submit employer annual returns?
Annual employer returns (Form H1) are due by 31 January for the prior tax year.
Does NHF apply to all employees?
Under BFA 2022, private-sector employees can opt out of NHF. Treat it as opt-in per employee, not a default deduction. Confirm each employee’s status before deducting.
Can my payroll software handle PAYE remittance automatically?
Yes, if you use Lint Payroll. It covers PAYE computation, pension, NHF, payslips, remittance, and salary advances, all for ₦500 per employee per payroll run. It also handles withholding tax (WHT) auto-deduction and remittance on contractor payments.
Related Tools
- Lint Payroll → PAYE computation + pension + payslips + remittance for ₦500 per employee per run
- Free PAYE Calculator → Work out take-home pay, PAYE, pension, and rent relief in seconds
- Nigeria Revenue Service → Official PAYE remittance portal
- PenCom → Pension remittance via CRS system
One Line Worth Saving
The tax-free threshold is ₦800,000 a year. Your first taxed naira is at 15%. Anyone still quoting 7% is working off a repealed law.
Written by the Lint Finance team. Reviewed against the Nigeria Tax Act 2025 (Sixth Schedule) and Pension Reform Act 2014.
Published: May 2026 | Regulatory basis: NTA 2025, effective 1 January 2026
Official sources: Nigeria Revenue Service | PenCom | Federal Mortgage Bank of Nigeria
Disclaimer: This post is educational and does not constitute tax or legal advice. Consult a qualified tax professional for your specific situation.
Related on Lint
- Free PAYE Calculator (2026) See take-home pay, tax and pension in seconds.
- Lint Payroll Run salary, PAYE, pension and salary advances in one funded run.
Sources
- NTA 2025
- NTA 2025 Sixth Schedule
- PRA 2014
- National Housing Fund Act
- NHIA 2022
- NTA 2025 / FIRS remittance rules
- FIRS: Federal Inland Revenue Service
- NRS
