Nigeria PAYE 2026: How to Calculate Your Take-Home Pay
The Nigeria Tax Act 2025 changed how PAYE is calculated from January 2026. Here is exactly how to work out your tax and take-home pay under the new bands — with a full worked example.
From 1 January 2026, the Nigeria Tax Act 2025 changed how PAYE (Pay As You Earn) is calculated for every salaried worker in Nigeria. The old Consolidated Relief Allowance is gone, replaced by a higher tax-free threshold and a new rent relief. Here's how to work out your tax — and your real take-home pay — under the new rules. Prefer to skip the maths? Use the free Nigeria PAYE Calculator.
The 2026 PAYE tax bands
Tax is applied progressively to your chargeable income (income after allowable deductions):
- 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%
Step 1: Work out your deductions
Before applying the bands, subtract allowable deductions from your gross income:
- Pension — a minimum of 8% of your emoluments.
- NHF / NHIS — where applicable.
- Rent relief — 20% of annual rent, capped at ₦500,000 (declaration and documentation required).
Step 2: A worked example
Say you earn ₦6,000,000 a year and pay ₦1,200,000 in rent:
- Pension (8%): ₦480,000
- Rent relief (20% of ₦1.2m, capped at ₦500k): ₦240,000
- Chargeable income: ₦6,000,000 − ₦480,000 − ₦240,000 = ₦5,280,000
Now apply the bands to ₦5,280,000:
- First ₦800,000 @ 0% = ₦0
- Next ₦2,200,000 @ 15% = ₦330,000
- Remaining ₦2,280,000 @ 18% = ₦410,400
- Annual PAYE = ₦740,400 → about ₦61,700 per month
Your monthly take-home is roughly ₦398,300 (gross, minus pension and tax), at an effective tax rate of about 12.3%.
Step 3: Check your payslip
Employers must deduct PAYE monthly and remit to the relevant State Internal Revenue Service. If your payslip tax looks far off the estimate above, ask your HR/payroll team whether they've applied the 2026 bands, your pension, and your declared rent relief correctly.
The single biggest 2026 change for workers: the first ₦800,000 is tax-free and the old 1% minimum tax is gone — most low and middle earners keep more of their salary.
Want your exact numbers in seconds? Try the Nigeria PAYE Calculator, and if you run a business, see what the reforms mean for your company in our Nigeria Tax Act 2025 guide.
Frequently Asked Questions
What are the new PAYE bands in Nigeria for 2026?
On chargeable income: first ₦800,000 at 0%, next ₦2,200,000 at 15%, next ₦9,000,000 at 18%, next ₦13,000,000 at 21%, next ₦25,000,000 at 23%, and everything above ₦50,000,000 at 25%.
How much can I earn tax-free in Nigeria?
The first ₦800,000 of chargeable income is taxed at 0%. Combined with pension and rent relief deductions, many low earners pay little or no PAYE. The old 1% minimum tax has been abolished.
How is take-home pay calculated?
Take gross income, subtract pension (minimum 8%), NHF/NHIS where applicable and rent relief to get chargeable income. Apply the progressive bands to get annual tax, divide by 12 for monthly PAYE, then subtract tax and pension from gross for your net pay.
How does rent relief reduce my PAYE?
Rent relief is 20% of your annual rent, capped at ₦500,000. It reduces your chargeable income before tax is applied, but you must declare your rent and keep documentation.
Amara writes about invoicing, taxation, and cash-flow management for SMBs across West Africa. ACCA-certified.
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