The New PAYE Tax Law in Nigeria (2026): What You Actually Pay Now
Nigeria's tax system changed on 1 January 2026 under the Nigeria Tax Act 2025. New income-tax bands, a bigger zero-rate band, a new rent relief, and the tax office renamed from FIRS to the Nigeria Revenue Service (NRS). Here is the honest, plain-English version of what it means for your take-home pay — and how to work out your own number.
Not tax advice. This explains the law in general terms. Your exact tax depends on your reliefs and circumstances — confirm with the NRS or a tax professional, and check the figures are current when you read this.
The headline: low earners now pay zero
The biggest change is a wide 0% band. The first ₦800,000 of your chargeable income — what is left after reliefs — is taxed at nothing. Because of the reliefs below, many people earning up to roughly ₦1.2 million a year end up paying no income tax at all.
The old minimum tax (1% of income, payable even by people whose reliefs wiped out their liability) is abolished. That change alone removes a real grievance: under the old rules you could compute your way to zero taxable income and still owe money.
The 2026 income-tax bands
Tax applies to your chargeable income — gross pay minus your reliefs — in progressive slices:
| Chargeable income (per year) | Rate |
|---|---|
| First ₦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% |
Only the slice inside each band is taxed at that rate — earning into a higher band never makes your whole income cost more.
The reliefs that cut your chargeable income
- Pension: your 8% employee contribution is deducted before tax.
- Rent relief: 20% of the annual rent you actually pay, capped at ₦500,000 — a new relief that replaced the old Consolidated Relief Allowance. You must be able to declare the rent accurately, and the tax authority may ask for supporting information, so keep your tenancy agreement and receipts.
- NHF: the 2.5% National Housing Fund contribution is now voluntary for private-sector workers.
- Life assurance premiums may also be deductible.
Note what the swap means in practice. The old Consolidated Relief Allowance was automatic and scaled with income; the new rent relief is conditional on paying rent and on declaring it. Renters who claim it properly generally do well; homeowners lose the automatic allowance and lean on the wide ₦800,000 zero band instead. If you rent and do not claim, you are simply paying more tax than the law asks of you.
A worked example
Take a salary of ₦3,000,000 a year with rent of ₦1,200,000:
- Pension relief: 8% × ₦3,000,000 = ₦240,000
- Rent relief: 20% × ₦1,200,000 = ₦240,000 (below the ₦500,000 cap)
- Chargeable income: ₦3,000,000 − ₦240,000 − ₦240,000 = ₦2,520,000
- Tax: 0% on the first ₦800,000; 15% on the remaining ₦1,720,000 = ₦258,000 a year, about ₦21,500 a month
That is an effective rate of about 8.6% of gross — not 15%, because most of the income sits in the zero band and reliefs come off first. Had the same person not claimed rent relief, the bill would be ₦294,000: the claim is worth ₦36,000 a year for filling in a form correctly.
Work out your own take-home
Rather than doing the bands by hand, put your salary into our Nigeria income-tax (PAYE) calculator — it applies the 2026 bands, pension and rent relief and shows your monthly take-home. Then plan what to do with it using the affordability calculator and budgeting on a Nigerian salary.
What else changed
- FIRS is now the NRS (Nigeria Revenue Service).
- From 1 January 2026, your NIN (individuals) or CAC number (businesses) replaces the TIN as your tax identifier — see how to get a TIN in Nigeria for what that means in practice.
- The ₦50 electronic-transfer levy (EMTL / stamp duty) on transfers of ₦10,000 or more is now paid by the sender rather than the receiver, from 1 January 2026 — salaries and intra-bank transfers excepted. See Nigerian bank charges explained and how to reduce bank charges.
What it does and doesn't fix
Worth being straight about this. The reform meaningfully cuts income tax for lower and middle earners, and abolishing minimum tax removes an unfair charge.
But tax is only part of the squeeze. Headline inflation was still running at about 15.43% in July 2026, with the CBN's policy rate at 26.5%. A tax cut that leaves an extra ₦36,000 in your pocket is real money, and inflation at 15% takes more than that from a ₦3m salary over a year. The tax change is worth claiming in full — and it is not a substitute for getting a return on what you keep. See how to protect your money from naira devaluation.
Frequently asked questions
Do I really pay no tax if I earn under ₦1.2m? Roughly — once pension and rent relief bring your chargeable income under ₦800,000, you fall in the 0% band. The exact threshold depends on your reliefs.
Is the rate applied to my whole salary? No. Nigeria uses progressive bands — each slice of income is taxed at its own rate, so moving into a higher band only taxes the extra naira.
What replaced the Consolidated Relief Allowance? A rent relief of 20% of annual rent paid, capped at ₦500,000, alongside the much wider 0% band on the first ₦800,000 of chargeable income.
Do I need receipts for rent relief? You must declare the rent accurately and the tax authority may request supporting information — keep your tenancy agreement and payment records.
Is minimum tax still charged? No. The old 1% minimum tax was abolished under the Nigeria Tax Act 2025.
Where do I file? Through the NRS TaxPro Max system. Employers deduct PAYE monthly; check your payslip reflects the new bands — see understanding your Nigerian payslip.
Educational information, not tax advice. Figures are from the Nigeria Tax Act 2025 (effective 1 January 2026) and may be updated — confirm current bands and reliefs with the NRS or a tax professional before relying on them.
