PAYE under the Nigeria Tax Act 2025: a plain guide for employers

Since 1 January 2026, PAYE in Nigeria has been worked out under the Nigeria Tax Act 2025 (NTA). It replaced the Personal Income Tax Act (PITA), and with it the way most payroll spreadsheets in the country were built.

If you still have a formula with “₦200,000 plus 20% of gross” in it, that formula is now wrong for 2026 salaries. This guide covers what changed, shows the new bands, and walks through a full example so you can check your own numbers.

What changed in one paragraph

The Consolidated Relief Allowance (CRA) is gone. In its place there is a much bigger tax-free band (the first ₦800,000 of chargeable income each year), a new rent relief for employees who rent their home, and a new set of rates that tops out at 25% instead of 24%. The old 1% minimum tax on low earners has also gone.

The new PAYE bands

These apply to annual chargeable income, which is pay after the allowed deductions further down this page.

Annual chargeable income	Rate
First ₦800,000	0%
Next ₦2,200,000 (up to ₦3 million)	15%
Next ₦9,000,000 (up to ₦12 million)	18%
Next ₦13,000,000 (up to ₦25 million)	21%
Next ₦25,000,000 (up to ₦50 million)	23%
Above ₦50,000,000	25%

For a monthly payroll, the usual approach is to annualise the month’s pay, apply the bands, and divide the tax by 12.

What you can deduct before applying the bands

Under the NTA, these come off an employee’s income before tax is worked out:

• Pension contributions. Under the Pension Reform Act 2014, the employee contributes 8% of basic salary, housing and transport allowances (often called BHT), and the employer adds 10%. The employee’s 8% is deductible.
• National Housing Fund (NHF) contributions, 2.5% of basic salary, where the employee contributes.
• National Health Insurance contributions.
• Life assurance premiums for the employee or their spouse.
• Interest on a loan for the employee’s own home.
• Rent relief: 20% of the annual rent the employee pays, capped at ₦500,000. More on this below.

Rent relief, the part that needs paperwork

Rent relief is the one deduction you cannot work out from payroll data alone, because it depends on what each employee pays their landlord.

• It is 20% of annual rent, up to a maximum of ₦500,000. Anyone paying ₦2.5 million or more a year in rent gets the full ₦500,000.
• It is only for tenants. An employee who owns their home, or lives rent-free with family, doesn’t get it.
• The employee has to declare the rent, and your state tax authority can ask for proof such as a tenancy agreement or receipts.

In practice, collect a short rent declaration from each employee at the start of the year (and when they move), keep the supporting document on file, and only apply the relief once you have it.

A worked example

Take an employee in Lagos on ₦500,000 a month:

Pay item	Monthly	Annual
Basic salary	₦250,000	₦3,000,000
Housing allowance	₦125,000	₦1,500,000
Transport allowance	₦75,000	₦900,000
Other allowances	₦50,000	₦600,000
Gross pay	₦500,000	₦6,000,000

They rent a flat for ₦1,200,000 a year.

1. Pension (8% of BHT): basic, housing and transport add up to ₦450,000 a month, or ₦5,400,000 a year. 8% of that is ₦432,000.
2. Rent relief: 20% of ₦1,200,000 is ₦240,000, which is under the ₦500,000 cap.
3. Chargeable income: ₦6,000,000 minus ₦432,000 minus ₦240,000 is ₦5,328,000.
4. Tax:
   • First ₦800,000 at 0%: ₦0
   • Next ₦2,200,000 at 15%: ₦330,000
   • The remaining ₦2,328,000 at 18%: ₦419,040
5. Annual PAYE: ₦749,040, which is ₦62,420 a month.

Under the old PITA rules, the same employee would have had a CRA of ₦1,400,000 instead of rent relief, and would have paid about ₦66,027 a month. The new rules leave them roughly ₦3,600 a month better off.

At the other end of the scale, an employee on the ₦70,000 national minimum wage whose pension is deducted ends up with chargeable income of ₦772,800 a year. That is under the ₦800,000 tax-free band, so they pay no PAYE at all.

Who you pay, and when

• PAYE goes to the State Internal Revenue Service of the state where the employee lives, not the state where your office is. A Lagos company with a staff member living in Ogun pays that person’s PAYE to Ogun State. We cover this in detail in where to pay PAYE for staff in different states. It is due by the 10th of the following month.
• Pension (the employee’s 8% plus your 10%) goes to each employee’s Pension Fund Administrator, within 7 working days of paying salaries. It is compulsory for employers with three or more staff.
• Compensation for loss of employment is now exempt up to ₦50 million, up from ₦10 million, which matters if you are working out a redundancy package.

A checklist for your payroll

1. Remove CRA from every 2026 calculation. Keep the old logic only for correcting pre-2026 months.
2. Load the new bands, starting at 0% on the first ₦800,000.
3. Calculate pension on basic, housing and transport, not on basic alone and not on gross.
4. Collect rent declarations and apply rent relief only with evidence on file.
5. Record each employee’s state of residence, and group your PAYE remittances by state.
6. Recheck your January to date figures if you started the year on old formulas. Over-deductions need to be corrected, and employees notice.

How Eban helps

Eban’s Nigerian payroll calculates pension on basic, housing and transport, applies the NTA 2025 bands from January 2026, and handles rent relief as a per-employee relief, so you enter each person’s rent once and the system does the rest. Employees see their pension, PAYE and other deductions as separate lines on their payslip in the Eban mobile app.