How to Calculate PAYE Tax in Nigeria (2026)

June 28, 2026

Payroll and People

How to Calculate PAYE Tax in Nigeria (2026)

Nankyer Ndom

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How to Calculate PAYE Tax in Nigeria (2026)

PAYE Nigeria changed significantly on 1 January 2026. If your payroll still runs on the old 7%–24% bands, you’re computing wrong, and so is every blog post written before the Nigeria Tax Act 2025 kicked in.

This guide shows you the correct 2026 calculation, step by step, with real naira numbers.

Quick Answer

The Nigeria Tax Act 2025 (NTA 2025) replaced the Personal Income Tax Act (PITA) effective 1 January 2026. Under the new law, the first ₦800,000 of annual chargeable income is taxed at 0%, and the top rate is 25% on income above ₦50,000,000. The old Consolidated Relief Allowance (CRA), formerly ₦200,000 + 20% of gross income, does not apply to 2026 onward.

What You’ll Need

Employee’s gross salary breakdown (Basic, Housing, Transport, Other Allowances)
Employee’s pension deduction (8% of Basic + Housing + Transport)
Whether the employee contributes to NHF
Annual rent paid by the employee (for rent relief, if applicable)
A payroll tool or spreadsheet, or Lint Payroll

Estimated time: 10–20 minutes per employee manually. With Lint: automatic.

The 2026 PAYE Tax Bands (NTA 2025)

Many pre-2026 sources, including some government pages and most blog content from 2024–2025, still describe the old PITA regime. Here are the correct 2026 bands:

Annual Chargeable Income	Rate
First ₦800,000	0%
Next ₦2,200,000 (₦800,001 – ₦3,000,000)	15%
Next ₦9,000,000 (₦3,000,001 – ₦12,000,000)	18%
Next ₦13,000,000 (₦12,000,001 – ₦25,000,000)	21%
Next ₦25,000,000 (₦25,000,001 – ₦50,000,000)	23%
Above ₦50,000,000	25%

The old bands (7%, 11%, 19%, 24%) are gone. Stop using them.

How to Calculate PAYE in Nigeria: Step by Step

Step 1: Compute Annual Gross Emoluments

Add up annual gross emoluments: Basic + Housing + Transport + Other Allowances.

Example employee: Amaka, Lagos:

Component	Monthly	Annual
Basic	₦150,000	₦1,800,000
Housing	₦60,000	₦720,000
Transport	₦40,000	₦480,000
Gross	₦250,000	₦3,000,000

Step 2: Deduct Pension (Employee Contribution)

The employee pension rate is 8% of pensionable emoluments, which is Basic + Housing + Transport, not gross salary.

Amaka’s pensionable emoluments = ₦1,800,000 + ₦720,000 + ₦480,000 = ₦3,000,000

Employee pension = 8% × ₦3,000,000 = ₦240,000

Common mistake: Many payrolls calculate pension on total gross including other allowances. That’s wrong. Pension is on Basic + Housing + Transport only.

Step 3: Apply Rent Relief (If Applicable)

Rent relief under NTA 2025 is 20% of annual rent paid by the employee, capped at ₦500,000. The employee files for the relief and the employer applies it to the PAYE computation.

Assume Amaka pays ₦600,000 in annual rent:

Rent relief = 20% × ₦600,000 = ₦120,000 (under the ₦500,000 cap, so the full ₦120,000 applies)

Step 4: Calculate Annual Chargeable Income

Subtract statutory deductions (employee pension, NHF, NHIS where applicable) and reliefs (rent relief) from gross emoluments to get chargeable income.

	Amount
Annual Gross	₦3,000,000
Less: Pension (8%)	–₦240,000
Less: Rent Relief	–₦120,000
Annual Chargeable Income	₦2,640,000

Step 5: Apply the PAYE Tax Bands

Apply the NTA 2025 bands to the chargeable income on an annual basis.

Amaka’s chargeable income = ₦2,640,000

Band	Amount Taxed	Rate	Tax
First ₦800,000	₦800,000	0%	₦0
Next ₦1,840,000 (₦800K–₦2.64M)	₦1,840,000	15%	₦276,000
Annual PAYE			₦276,000

Step 6: Divide by 12 for Monthly Deduction

Divide the annual PAYE by 12 to get the monthly deduction.

Monthly PAYE = ₦276,000 ÷ 12 = ₦23,000/month

Full Cost Table: What Leaves Amaka’s Payslip Monthly

Deduction	Calculation	Monthly Amount
Employee Pension (8%)	8% × ₦250,000	₦20,000
PAYE	Annual ÷ 12	₦23,000
Total Deductions		₦43,000
Net Pay (Take-Home)		₦207,000

NHF is not included here. 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.

Employer Obligations: What You Also Owe

Your employee’s deduction is only half the picture. As the employer:

Employer pension: 10% of (Basic + Housing + Transport)

Amaka’s employer pension = 10% × ₦3,000,000 = ₦300,000/year (₦25,000/month)

PAYE remittance deadline: The 10th day of the month following the month of deduction.

Pension remittance deadline: Within 7 working days of salary payment.

Annual employer return (Form H1): 31 January for the prior tax year.

Miss any of these and the PRA 2014 penalty is 2% of unpaid contributions per month.

Key Changes From the Old PITA Regime (Don’t Get These Wrong)

If you used the old system, here’s what changed on 1 January 2026:

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.

What Changed	Old PITA (Pre-2026)	NTA 2025 (2026 onward)
Tax-free threshold	No 0% band	First ₦800,000 at 0%
Lowest taxed rate	7%	15%
Highest rate	24%	25%
CRA	₦200,000 + 20% of gross	Eliminated
Rent relief	None	20% of rent, capped ₦500,000
Gratuity	Tax-exempt	Now taxable

The CRA, formerly ₦200,000 + 20% of gross income, does not apply to 2026 onward. Any content written for the 2026+ tax regime must not include CRA in PAYE calculations.

Common Mistakes Nigerian Business Owners Make on PAYE

1. Still using the old PITA bands

The 7%–24% bands are dead. Using them overstates tax for lower earners and slightly understates it at the top. Both get you into trouble.

2. Computing pension on total gross salary

Pension is on Basic + Housing + Transport. If you include meal allowances, vehicle allowances, or sitting fees in the base, you’re calculating wrong.

3. Applying CRA to 2026 payroll

The CRA is eliminated. The ₦200,000 + 20% of gross formula no longer exists in 2026 tax computation.

4. Treating NHIS as a fixed 5% + 10% formula

There is no longer a single statutory ‘5% employee + 10% employer of basic’ formula. Premiums vary by the chosen HMO plan.

5. Missing the PAYE remittance deadline

The 10th of the following month is firm. Most small businesses remit late because payroll is still manual. An automated system fixes this entirely.

How Lint Handles PAYE for Your Business

Running payroll manually is a 2–4 hour job per month, per business. And one wrong formula means you’re resubmitting to the state tax authority and apologising to employees about amended payslips.

Lint Payroll covers PAYE computation, pension, NHF, payslips, remittance, and salary advances, all for ₦500 per employee per payroll run. Salary disbursement is free to a Lint account and ₦40 to any other Nigerian bank.

For context: if you have 5 employees, that’s ₦2,500 per payroll run for compliant PAYE, correct pension deductions, payslips, and remittance filing, all handled. No more chasing the formula.

FAQs: PAYE Nigeria 2026

What is PAYE tax in Nigeria?

PAYE (Pay As You Earn) is the system Nigerian employers use to deduct income tax from employees’ salaries monthly and remit it to the state tax authority. It’s governed by the Nigeria Tax Act 2025 from 1 January 2026 onward.

What is the minimum salary to pay PAYE in Nigeria in 2026?

The first ₦800,000 of annual chargeable income is taxed at 0%, that’s roughly ₦66,667/month. Anyone earning below that effective threshold (after deductions) pays no income tax.

What are the 2026 PAYE rates in Nigeria?

The bands under NTA 2025 run from 0% (first ₦800,000) to 25% (above ₦50,000,000). The first taxable band is 15%, not 7%.

How is pension calculated for PAYE purposes?

Employee pension is 8% of Basic + Housing + Transport allowances, not gross salary. This pension deduction reduces the employee’s chargeable income before PAYE bands are applied.

When is PAYE due in Nigeria?

PAYE must be remitted by the 10th day of the month following the month of deduction. The annual employer return (Form H1) is due 31 January.

Is gratuity still tax-exempt in 2026?

No. Gratuity is now taxable under NTA 2025. This is one of the most missed changes from the old PITA regime.

Can employees claim NHF deductions?

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.

What replaced the Consolidated Relief Allowance (CRA)?

The CRA was replaced by two things: a tax-free threshold of the first ₦800,000 at 0%, and a rent relief of 20% of annual rent paid, up to ₦500,000.

Related Tools

Lint Payroll → PAYE computation, pension, payslips, and remittance in one place
Free PAYE Calculator → Work out take-home pay, PAYE, pension, and rent relief in seconds
Nigeria Revenue Service (NRS) → Official tax authority for PAYE filings and employer queries
PenCom CRS → Pension remittance portal

Bottom Line

The 2026 PAYE calculation is genuinely more employee-friendly than the old PITA system. The 0% band on the first ₦800,000 means lower earners keep more take-home. But the correct formula matters. One wrong assumption (wrong bands, wrong pension base, leftover CRA) means recomputing, reremitting, and explaining yourself to employees and the tax authority.

Do it right once. Then automate it.

Start with Lint Payroll →

Published: May 2026 | Reviewed against: Nigeria Tax Act 2025 (Sixth Schedule), Pension Reform Act 2014, National Housing Fund Act, NHIA Act 2022 | Regulatory data sourced from the NTA 2025-aligned locked facts document. For the latest FIRS/NRS guidance, visit nrs.gov.ng.