How to compute PAYE in Nigeria under NTA 2025 (2026 guide)

If you processed Nigerian payroll before January 2026 and you're running the same numbers today, they're wrong. The Nigeria Tax Act 2025 (NTA 2025) took effect on 1 January 2026 and rewrote almost every moving part of PAYE — the brackets, the reliefs, the minimum tax rule, even the regulator's name.

This guide walks through one full calculation end-to-end under NTA 2025 so you can sanity-check what your payroll system (or your accountant) is producing in 2026.

What changed on 1 January 2026

Five things you need to know before running a single calculation:

1. Brackets were rewritten. Six bands at 0%, 15%, 18%, 21%, 23%, 25% — no more 7%/11%/19%/24%.
2. Tax-free threshold. The first ₦800,000 of taxable income is now zero-rated. No resident pays tax on income below this line.
3. CRA is gone. The Consolidated Relief Allowance (the old ₦200,000 + 20%-of-gross formula) was abolished.
4. Rent Relief replaces it. Employees claim min(20% × annual rent, ₦500,000) as a deduction — but only if they declare their rent.
5. No more 1% minimum tax. The floor that used to bite low-income earners with heavy reliefs is gone.

The law is administered by the Nigeria Revenue Service (NRS) — the renamed FIRS — under NTA 2025.

1. Start with annual gross pay and the salary breakdown

PAYE is computed annually, then divided by 12. Under NTA 2025 the pensionable components matter more than before: pension is 8% of basic + housing + transport, not 8% of gross.

For this worked example, take an employee on ₦6,000,000 annual gross, structured as:

Component	Share	Annual
Basic	60%	₦3,600,000
Housing	20%	₦1,200,000
Transport	10%	₦600,000
Other allowances	10%	₦600,000
Pensionable (BHT)	—	₦5,400,000

2. Subtract statutory deductions (pre-tax)

Deductions that reduce taxable income:

• Pension — 8% of pensionable (BHT)
• NHF (National Housing Fund) — 2.5% of basic, now voluntary under NTA 2025. Employees must opt in.
• NHIS / NHIA — only where the employer has enrolled

For our employee, assuming they opted out of NHF (the new default choice):

Pension = ₦5,400,000 × 8% = ₦432,000 Income after statutory deductions = ₦6,000,000 − ₦432,000 = ₦5,568,000

3. Apply Rent Relief

This is the biggest mindset shift. Under Section 30(2)(a)(vi) of NTA 2025 there is no automatic relief — the employee must declare their annual rent through your payroll system. The deduction is:

Rent Relief = min(20% × declared annual rent, ₦500,000)

If the employee declares ₦1,200,000 annual rent:

• 20% of ₦1,200,000 = ₦240,000
• Cap of ₦500,000 does not bite
• Rent Relief = ₦240,000

If the employee does not declare rent, relief is zero. There is no fallback formula.

4. Find the chargeable income

Chargeable income = Income after statutory − Rent Relief = ₦5,568,000 − ₦240,000 = ₦5,328,000

5. Apply the NTA 2025 bracket table

Six bands set by Section 58 and the Fourth Schedule of NTA 2025. Apply each rate only to the slice of income that falls inside that band:

Band	Annual range	Rate
1	First ₦800,000	0%
2	Next ₦2,200,000 (₦800K → ₦3M)	15%
3	Next ₦9,000,000 (₦3M → ₦12M)	18%
4	Next ₦13,000,000 (₦12M → ₦25M)	21%
5	Next ₦25,000,000 (₦25M → ₦50M)	23%
6	Above ₦50,000,000	25%

Walking through ₦5,328,000:

• Band 1: ₦800,000 × 0% = ₦0
• Band 2: ₦2,200,000 × 15% = ₦330,000
• Band 3: ₦2,328,000 × 18% = ₦419,040

Computed PAYE = ₦749,040 / year ≈ ₦62,420 / month

No minimum tax check. The computed figure stands.

6. Net pay

Net = Gross − Pension − PAYE = ₦6,000,000 − ₦432,000 − ₦749,040 = ₦4,818,960 / year ≈ ₦401,580 / month

Common mistakes we see under NTA 2025

1. Still applying CRA. It was abolished on 1 January 2026. Any payroll system still deducting ₦200,000 + 20%-of-gross is over-relieving and under-taxing.
2. Assuming Rent Relief applies automatically. It only applies when the employee declares annual rent. Default-zero is correct — but make sure your self-service portal lets staff enter it.
3. Computing pension on gross. Pensionable is basic + housing + transport only. Computing 8% of full gross over-deducts and over-reports to PenCom.
4. Still deducting NHF by default. From 1 January 2026 NHF is voluntary for private-sector employees. Opt-in must be explicit.
5. Running the minimum tax check. There is no minimum tax under NTA 2025. Scripts that still apply the old 1%-of-gross floor are wrong.
6. Computing PAYE on monthly figures. Bracket thresholds are annual. Always annualise first, then divide the final PAYE by 12.

Historical context: Finance Act 2020 (pre-2026 only)

If you are reconciling payroll periods on or before 31 December 2025, the Finance Act 2020 still applies to those periods:

• CRA = higher of (₦200,000 or 1% of gross) + 20% of gross
• Brackets: 7% / 11% / 15% / 19% / 21% / 24% across six bands starting at ₦300,000
• 1% minimum tax on gross if the bracketed figure was lower
• NHF was mandatory for staff in scope

Do not apply Finance Act 2020 figures to 2026 payroll, and do not back-apply NTA 2025 figures to 2025 periods. Payroll systems should date-route each period to the governing act automatically.

Does AnooreHR handle this?

Yes — AnooreHR date-routes every payroll period to the correct tax act automatically. Periods up to December 2025 use Finance Act 2020; periods from January 2026 onwards use NTA 2025. The rent-relief declaration, NHF opt-in/opt-out, and pensionable-components logic all live in a profile pack, not hard-coded — so when rates change again, nothing in your workflow breaks.

Want to see how your current payroll numbers compare under NTA 2025? Book a quick demo — bring one real payslip and we'll walk through it line by line.

Related: How AnooreHR handles payroll · Nigerian pension contribution guide · See pricing