PAYE (pay as you earn) is income tax that your employer deducts from your salary and pays to the tax authority. From 1 January 2026 the rates follow the Nigeria Tax Act 2025.
The tax bands
| Yearly taxable income | Rate |
|---|---|
| First ₦800,000 | 0% |
| Next ₦2,200,000 | 15% |
| Next ₦9,000,000 | 18% |
| Next ₦13,000,000 | 21% |
| Next ₦25,000,000 | 23% |
| Above ₦50,000,000 | 25% |
Each rate applies only to the slice of income inside its band. Reaching a higher band does not raise the tax on income you already earned in a lower one.
What reduces your taxable income
- Pension. The usual employee contribution is 8% of basic, housing and transport pay.
- National Housing Fund. 2.5% of basic pay, where your employer deducts it.
- Health insurance (NHIS). Where deducted from basic pay.
- Rent relief. 20% of the rent you pay in a year, up to ₦500,000.
Worked example: ₦200,000 a month
Yearly gross pay is ₦2,400,000. With a 50/25/15 split between basic, housing and transport, pension is 8% of 90% of gross, which is ₦172,800. Taxable income is ₦2,227,200.
Tax: the first ₦800,000 at 0% is ₦0. The remaining ₦1,427,200 falls in the 15% band and gives ₦214,080. Net pay is ₦2,400,000 − ₦172,800 − ₦214,080 = ₦2,013,120 a year, about ₦167,760 a month.
See the same method for other salaries on our salary after tax tables.
Why your payslip may differ
Employers split pay differently, add allowances or deductions such as loans, and may treat bonuses separately. Use these figures as a close estimate and confirm with your payroll team. Try your own numbers in the PAYE calculator.
Frequently asked questions
Is the first ₦800,000 really tax-free?
Yes. Under the Nigeria Tax Act 2025, the first ₦800,000 of taxable income in a year is taxed at 0%.
What replaced the Consolidated Relief Allowance?
The new rules replace it with a rent relief of 20% of rent paid, up to ₦500,000 a year, alongside deductions such as pension.