Nigeria's New PAYE Rates for 2026
The 2026 PAYE bands in full: 0% to 25%, the first ₦800,000 tax-free, rent relief replacing the CRA, and worked take-home examples.
· NairaTax Tax Advisory Team · 7 min read
PAYE tax in Nigeria in 2026 is charged on your annual taxable income after reliefs: the first ₦800,000 is taxed at 0%, then 15% up to ₦3 million, rising through 18%, 21%, 23% and 25% at the top. On a ₦400,000 monthly salary you pay about ₦48,740 PAYE, leaving ₦319,260 net.
The new bands took effect on 1 January 2026 under the Nigeria Tax Act 2025 (NTA 2025), and they are more generous at the bottom than the old law. This guide shows the full rate table, how the calculation works step by step, and exactly what lands in your account at ₦150,000, ₦400,000 and ₦1,000,000 a month.
How we keep this accurate: figures below match NairaTax's calculators, which implement the Nigeria Tax Act 2025.
Key takeaways
- The first ₦800,000 of annual taxable income is tax-free (0%) — that is income left after pension and other reliefs, not your gross salary, so most low earners fall well below it.
- PAYE runs through six bands from 0% up to a top rate of 25% on taxable income above ₦50 million a year.
- On ₦400,000/month you pay ₦48,740 PAYE and take home ₦319,260 — an effective rate of just 12.2%.
- The national minimum wage of ₦70,000/month is fully exempt — an employee earning only the minimum wage pays ₦0 PAYE.
- Reliefs cut your bill before the bands apply: pension (8% of gross), rent relief (the lower of 20% of annual rent or ₦500,000), NHF, NHIS and life-assurance premiums.
The 2026 PAYE band table
Under the NTA 2025, PAYE is a progressive tax. Each slice of your annual taxable income (income after reliefs) is taxed at the rate for that band — you never pay a single flat rate on the whole amount.
| Annual taxable income | Rate |
|---|---|
| ₦0 – ₦800,000 | 0% |
| ₦800,001 – ₦3,000,000 | 15% |
| ₦3,000,001 – ₦12,000,000 | 18% |
| ₦12,000,001 – ₦25,000,000 | 21% |
| ₦25,000,001 – ₦50,000,000 | 23% |
| Above ₦50,000,000 | 25% |
The tax is administered by the Nigeria Revenue Service (NRS, formerly FIRS) and collected monthly by your employer through the Pay As You Earn system. To see your own number instantly, use the PAYE calculator or the monthly take-home calculator.
How PAYE is calculated, step by step
PAYE is not charged on your gross salary. It follows four steps.
Step 1 — Start with gross income
Add up your total annual pay: basic salary, housing, transport and other cash allowances.
Step 2 — Subtract your reliefs
Deduct the reliefs you qualify for. The biggest for most employees is the pension contribution of 8% of gross, followed by rent relief and any NHF, NHIS or life-assurance premiums.
Step 3 — Arrive at taxable income
Taxable income = gross − total reliefs. This is the figure the bands are applied to.
Step 4 — Apply the bands
Slice the taxable income across the six bands above and add up the tax on each slice. The first ₦800,000 attracts nothing; only income above that starts to be taxed.
Because the 0% band and the reliefs both come off before tax bites, your effective rate — total tax divided by gross pay — is always lower than the band rate you reach. You can watch this play out on the gross-to-net calculator.
Reliefs that cut your tax
Reliefs are the legal deductions that shrink your taxable income before the bands apply. Claiming everything you are entitled to is the single most effective way to lower PAYE.
- Pension — 8% of gross. The standard employee contribution under the Pension Reform Act is deducted before tax. It is the default relief applied in most payrolls.
- Rent relief — the lower of 20% of annual rent or ₦500,000. This is new prominence under the NTA 2025 and directly reduces taxable income for renters.
- National Housing Fund (NHF). Mandatory 2.5% contributions for eligible employees are deductible.
- NHIS / health insurance. Approved health-insurance contributions reduce taxable income.
- Life-assurance premiums. Premiums on a genuine life policy on your own life are deductible.
- Owner-occupier house-loan interest. Interest on a loan for the home you live in also qualifies.
Rent relief worked example
Take an employee on ₦400,000/month who pays ₦1,200,000 a year in rent. Rent relief is 20% of ₦1.2m = ₦240,000 (below the ₦500,000 cap, so the full amount counts). Adding this relief pulls monthly PAYE down from ₦48,740 to ₦45,140 — about ₦3,600 a month saved, or roughly ₦43,000 a year, just for declaring rent correctly.
Worked examples: what you actually take home
The table below uses NairaTax's verified figures for monthly gross pay, assuming the standard 8% pension and no rent relief unless stated. These are the numbers our calculators produce for 2026.
| Monthly gross | Monthly PAYE | Monthly net | Effective rate |
|---|---|---|---|
| ₦70,000 (min wage) | ₦0 | ₦70,000 | 0% (exempt) |
| ₦150,000 | ₦10,700 | ₦127,300 | 7.1% |
| ₦400,000 | ₦48,740 | ₦319,260 | 12.2% |
| ₦1,000,000 | ₦148,100 | ₦771,900 | 14.8% |
₦150,000 a month
After pension and the 0% band, only a modest slice reaches the 15% rate. PAYE is ₦10,700/month, leaving ₦127,300 in hand — an effective rate of just 7.1%.
₦400,000 a month
This is the salary most mid-level professionals ask about. PAYE is ₦48,740/month and net pay is ₦319,260, for an effective rate of 12.2%. Add rent relief on ₦1.2m annual rent and the bill drops to ₦45,140. See the full breakdown at take-home on ₦400,000.
₦1,000,000 a month
Even at seven figures a month, the progressive structure keeps the effective rate at 14.8%: PAYE of ₦148,100 and net pay of ₦771,900. The top 25% band only applies to taxable income above ₦50 million a year, so it rarely touches ordinary salaries.
Compare any two salaries side by side on the take-home calculator or browse all tools on the calculators page.
The minimum-wage exemption
The NTA 2025 protects the lowest earners. An employee whose only income is the national minimum wage of ₦70,000/month is fully exempt and pays ₦0 PAYE. This is a deliberate design choice: after the 8% pension deduction and the ₦800,000 annual 0% band, minimum-wage pay never reaches a taxable slice. It also means small pay rises just above the minimum wage attract very little tax, keeping low-income take-home pay almost entirely intact.
How to reduce your PAYE legally
You cannot change the bands, but you can lower the taxable income they apply to. All of the following are permitted under the Nigeria Tax Act 2025:
- Declare your rent. Rent relief of up to ₦500,000 a year is one of the easiest wins — as shown above, it can save around ₦3,600 a month.
- Maximise pension contributions. The 8% mandatory contribution is already tax-free; approved additional voluntary contributions (AVCs) can further reduce taxable income.
- Claim NHF and NHIS. If you contribute to the National Housing Fund or an approved health scheme, make sure payroll deducts them before tax.
- Use a life-assurance policy. Premiums on a genuine policy on your own life are deductible.
- Structure allowances correctly. Ensure your employer applies every relief you qualify for rather than taxing your full gross.
Confirm the current framework with the NRS (formerly FIRS) at firs.gov.ng and the official reform portal at fiscalreforms.ng, then model your own package on the PAYE calculator.
Frequently Asked Questions
How much PAYE do I pay on ₦400,000 a month?
On a ₦400,000 monthly gross salary with the standard 8% pension and no rent relief, PAYE is ₦48,740 a month, leaving a net take-home of ₦319,260. That is an effective tax rate of about 12.2%. Declaring annual rent of ₦1.2 million lowers the bill to ₦45,140.
What is the tax-free salary in Nigeria?
The first ₦800,000 of annual taxable income is taxed at 0%. Because taxable income is what remains after pension and other reliefs, the gross salary you can earn before any PAYE is higher than ₦800,000. An employee on the ₦70,000/month minimum wage is fully exempt and pays no PAYE at all.
How is PAYE calculated in Nigeria 2026?
PAYE is calculated in four steps: start with gross income, subtract reliefs (pension, rent, NHF, NHIS, life assurance) to get taxable income, then apply the six progressive bands from 0% to 25%. Your employer deducts the result monthly. Taxable income = gross − total reliefs.
Does pension reduce my PAYE?
Yes. The standard 8% pension contribution is deducted from your gross pay before the tax bands are applied, so it directly lowers your taxable income and your PAYE. Approved additional voluntary contributions reduce it further. It is the most common relief applied automatically in Nigerian payrolls.
Is the minimum wage taxed in Nigeria?
No. An employee earning only the national minimum wage of ₦70,000 a month is fully exempt and pays ₦0 PAYE under the Nigeria Tax Act 2025. After pension and the 0% band, minimum-wage income never reaches a taxable slice.
Which authority collects PAYE now?
PAYE is administered under the Nigeria Tax Act 2025 and overseen by the Nigeria Revenue Service (NRS, formerly FIRS), while your employer deducts and remits it monthly on your behalf. State tax authorities continue to receive PAYE for employees resident in their states.
This article is general information, not tax advice. Confirm figures with the Nigeria Revenue Service (NRS) or a licensed tax adviser.