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Tax & Compliance
Personal Income Tax Under the Nigeria Tax Act 2025
The Consolidated Relief Allowance is gone, the tax-free band is now ₦800,000, and rent relief has arrived. Here is what the new personal income tax rules do to an actual payslip.
8 September 2026 9 min readBy ereQa Team · Editorial team at ereQa
If you have used a Nigerian PAYE calculator built before 2026, it is almost certainly giving you the wrong answer. The Nigeria Tax Act 2025 did not tweak the personal income tax rules — it replaced the structure they were built on.
What was removed
The Consolidated Relief Allowance
The CRA was the backbone of the old calculation. It granted the higher of ₦200,000 or 1% of gross income, plus a further 20% of gross, as a blanket deduction before the bands applied. It is gone entirely.
That sounds like a loss, and for some higher earners it is. For most people it is more than offset by what replaced it: a 0% band that starts at ₦800,000 rather than ₦300,000.
The 1% minimum tax
Under the old rules, someone whose reliefs wiped out their liability still paid 1% of gross as a minimum. That rule is abolished. A nil assessment now means nil.
The 2026 bands
These apply to chargeable income — gross pay after pension, rent relief and any NHF or NHIS contributions — not to gross pay itself. Each rate applies only to the slice of income inside its band.
| Band of chargeable income | Width | Rate | Tax on a full band |
|---|---|---|---|
| First ₦800,000 | ₦800,000 | 0% | ₦0 |
| ₦800,001 – ₦3,000,000 | ₦2,200,000 | 15% | ₦330,000 |
| ₦3,000,001 – ₦12,000,000 | ₦9,000,000 | 18% | ₦1,620,000 |
| ₦12,000,001 – ₦25,000,000 | ₦13,000,000 | 21% | ₦2,730,000 |
| ₦25,000,001 – ₦50,000,000 | ₦25,000,000 | 23% | ₦5,750,000 |
| Above ₦50,000,000 | No ceiling | 25% | — |
Rent relief, and how to actually claim it
Rent relief is the headline new deduction: 20% of annual rent paid, capped at ₦500,000. The cap means the relief stops growing once rent passes ₦2,500,000 a year.
| Annual rent paid | Relief (20%) | Capped? |
|---|---|---|
| ₦600,000 | ₦120,000 | No |
| ₦1,200,000 | ₦240,000 | No |
| ₦2,500,000 | ₦500,000 | At the cap |
| ₦4,000,000 | ₦500,000 | Yes — capped |
It is not applied automatically by your employer. You need to declare the rent, and you need documentation — a tenancy agreement, receipts, or bank transfers showing the payments — if the relief is questioned. People who pay rent in cash without paperwork will struggle to claim it.
A worked example
Someone on ₦6,000,000 a year, paying ₦1,200,000 in rent, contributing the standard 8% to pension.
| Line | Amount |
|---|---|
| Gross income | ₦6,000,000 |
| Less pension (8%) | −₦480,000 |
| Less rent relief (20% of ₦1,200,000) | −₦240,000 |
| Chargeable income | ₦5,280,000 |
| Annual PAYE | ₦740,400 |
| Monthly PAYE | ₦61,700 |
| Effective rate on gross | 12.3% |
| Monthly take-home | ₦398,300 |
The band rate at that income is 18%, but the effective rate is 12.3%. That gap is the whole point of a progressive system, and it is the number most people get wrong when they estimate their own tax. You can run your own figures in the PAYE calculator.
What still comes off before the bands
- Pension — a minimum of 8% of gross under the Pension Reform Act.
- Rent relief — 20% of rent, capped at ₦500,000.
- National Housing Fund — where you contribute.
- NHIS — health insurance contributions where applicable.
- Life assurance premiums — on a policy on your own life.
If you are not on a payroll
Freelancers, consultants and sole traders pay the same rates on the same bands, but through direct assessment rather than PAYE. You file a self-assessment return with your State Internal Revenue Service, normally by 31 March for the preceding year, and you pay the tax yourself rather than having it withheld. The practical guide for that is here.
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This is general information, not tax advice. Thresholds and reliefs turn on facts specific to your business, and the Nigeria Revenue Service issues clarifications as the Act beds in. Confirm your position with a licensed tax adviser before you file.
Frequently Asked Questions
What are the new personal income tax rates in Nigeria?
On chargeable income: the first ₦800,000 at 0%, the next ₦2,200,000 at 15%, the next ₦9,000,000 at 18%, the next ₦13,000,000 at 21%, the next ₦25,000,000 at 23%, and anything above ₦50,000,000 at 25%.
Has the Consolidated Relief Allowance been abolished?
Yes. The CRA, which gave the higher of ₦200,000 or 1% of gross plus 20% of gross, no longer exists. It was replaced by a much larger 0% band of ₦800,000 and a targeted rent relief.
How much is rent relief worth?
20% of the annual rent you actually pay, capped at ₦500,000 a year. Rent of ₦1,200,000 gives ₦240,000 of relief; rent of ₦4,000,000 gives ₦500,000, because the cap bites. You must declare it and be able to evidence it.
Is there still a minimum tax on individuals?
No. The 1% minimum tax on gross income was abolished. If your chargeable income falls at or below ₦800,000 your liability is zero.
Do I pay tax where I work or where I live?
Generally where you are resident. This matters for anyone living in one state and working in another — an Ogun resident commuting into Lagos pays to Ogun, not Lagos.
eT
ereQa Team
Editorial team at ereQa
Written by the people who build ereQa, with Nigerian tax content checked against the Nigeria Tax Act 2025 and the NRS guidance current at publication. General information, not tax advice.
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