Since 1 January 2026, salaries in Nigeria are taxed under the Nigeria Tax Act 2025. The first ₦800,000 of taxable income each year is taxed at 0%, and the Consolidated Relief Allowance is gone.
Rent relief has replaced the old allowance, and anyone earning the national minimum wage or less from a job pays no income tax at all. Those changes reach almost every worker and side earner in the country.
This guide covers the changes that touch you most, with a worked example so you can see what they mean for a real payslip. It’s general information for Nigeria, not personal tax advice.
Four laws, one reform
President Tinubu signed four tax laws on 26 June 2025. The Nigeria Tax Act sets the taxes and rates. The Nigeria Tax Administration Act sets the rules for registering, filing and paying. The other two set up the Nigeria Revenue Service (NRS), which replaced the Federal Inland Revenue Service, and the Joint Revenue Board. The tax rules took effect on 1 January 2026.
Our earlier piece on the tax reform bills covers how they got here. This one sticks to what the final law says.
The new income tax bands
Each rate applies only to the slice of your yearly taxable income inside that band, so moving into a higher band never makes your whole income taxed at the higher rate.
| Taxable income in the year | Rate |
|---|---|
| First ₦800,000 | 0% |
| Next ₦2,200,000 (to ₦3m) | 15% |
| Next ₦9,000,000 (to ₦12m) | 18% |
| Next ₦13,000,000 (to ₦25m) | 21% |
| Next ₦25,000,000 (to ₦50m) | 23% |
| Above ₦50,000,000 | 25% |
The old bands started at 7% and topped out at 24%. The new top rate is 25%, but the 0% first band means lower and middle earners keep more of the first part of their pay. This is how a progressive tax works in practice.
What you can deduct now
The Consolidated Relief Allowance, which used to knock ₦200,000 plus 20% of gross income off your taxable pay, has been abolished. These are the main deductions in its place:
- Rent relief: 20% of the rent you pay on your home in the year, capped at ₦500,000. You have to declare the actual rent paid, and the tax authority can ask for proof.
- Pension: your contributions under the Pension Reform Act, usually 8% of basic, housing and transport pay.
- National Housing Fund: 2.5% of basic pay, if you contribute.
- Health insurance and life insurance: National Health Insurance contributions and life insurance or annuity premiums for you or your spouse.
- Mortgage interest: interest on a loan to build a house you live in.
Who now pays no income tax
Two groups pay nothing.
Minimum wage earners. Income from a job that pays the national minimum wage or less is exempt. The current minimum wage is ₦70,000 a month, set in 2024, so check for any later review before you rely on that figure.
Anyone whose taxable income is ₦800,000 or less. Note the word taxable. This is what’s left after pension, rent relief and the other deductions, not your gross pay. You’ll see headlines saying people earning up to about ₦1.2 million a year pay nothing. That holds only when deductions bring the taxable figure down to ₦800,000.
Example: you earn ₦100,000 a month (₦1,200,000 a year), all pensionable, and you pay ₦300,000 rent a year. Pension at 8% is ₦96,000 and rent relief is ₦60,000, leaving taxable income of ₦1,044,000. The first ₦800,000 is tax-free, and 15% of the remaining ₦244,000 is ₦36,600 for the year, about ₦3,050 a month. Low, but not zero.
A worked example on a ₦500,000 salary
This example assumes a gross salary of ₦500,000 a month (₦6,000,000 a year), all of it basic, housing and transport, and rent of ₦1,200,000 a year.
- Pension at 8%: ₦480,000.
- Rent relief at 20% of ₦1,200,000: ₦240,000 (under the ₦500,000 cap).
- Taxable income: ₦6,000,000 minus ₦480,000 minus ₦240,000 = ₦5,280,000.
- Tax: ₦0 on the first ₦800,000, ₦330,000 on the next ₦2,200,000 (15%), and ₦410,400 on the last ₦2,280,000 (18%).
- Total: ₦740,400 a year, or ₦61,700 a month.
Put your own figures into the PAYE calculator to see your monthly tax, take-home pay and a comparison with the old rules. For the full method, read how to calculate PAYE tax.
Other changes workers should know
- Severance: compensation for loss of a job is tax-free up to ₦50 million. Only the excess is taxed.
- Pensions and gratuities paid under the Pension Reform Act remain exempt.
- Capital gains for individuals are now added to income and taxed at the same bands, instead of the old flat 10%. Selling your home (once in a lifetime), up to two private cars a year, and small share sales have exemptions. More on capital gains tax.
- Every taxable person needs a Tax ID, and banks and other financial firms must ask for it. Our guide to getting a tax identification number explains the process.
- Employees file too. The administration law says an employee should file an annual return of income from all sources, on top of PAYE deductions. Side income from freelancing or trading belongs on it.
Crypto and side income
The Act lists profits from transactions in digital assets as taxable income, and digital assets as chargeable assets for capital gains. A loss on crypto can only be set against crypto gains, not against your salary.
If you get paid in USDT and sell it for naira, keep a record of each sale: the date, the amount and the naira you received. Snapiro’s History tab shows every completed sale, and the rate calculator shows today’s naira value before you sell.
Small businesses
Companies with turnover of ₦100 million or less and fixed assets under ₦250 million, outside professional services, now pay 0% company income tax and are exempt from capital gains tax and the 4% development levy. Larger companies pay 30%. You can test your numbers on the company income tax calculator.
Questions people ask
When did the new tax law start?
The tax rules apply from 1 January 2026. Your January 2026 payslip was the first one under the new bands.
Will everyone pay less tax?
Not necessarily. It depends on your pay, your pension and your rent. The 0% band helps lower earners most, while the 25% top band and the loss of the CRA weigh on high earners. The calculator shows your figure under both the old and new rules, and declaring your rent to your employer makes a real difference.
Who collects my PAYE?
Your employer deducts it and pays it to the internal revenue service of the state where you live. The NRS deals mainly with companies and federal taxes. More on personal income tax.
Has VAT changed?
The rate is still 7.5%. Basic food, medical products and services, and school tuition are zero-rated. Our guide to value added tax explains who pays it.
More guides on the new rules are in the tax in Nigeria section, and the official text is on the Nigeria Revenue Service website.
