13th-Month Pay and Bonuses in Nigeria: How They Are Taxed (2026)

Every December, the same question lands in Nigerian HR inboxes: "Is my 13th-month tax-free because it's a bonus?" The short answer is no. A 13th-month payment is not a gift and it is not exempt. It is employment income, and under the Nigeria Tax Act 2025 (NTA 2025) it is taxed through PAYE at the employee's marginal rate — the rate on their next naira of income. This post explains the difference between what the law requires and what employers actually do, then walks through the exact tax on a real bonus.

Is 13th-month pay required by law in Nigeria?

No. There is no statutory 13th-month entitlement in Nigerian law. The Labour Act sets out minimum standards for wages, leave, notice and termination, but it does not require an employer to pay a thirteenth month, a Christmas bonus, or any year-end lump sum.

What exists instead is common practice. Across banking, telecoms, oil and gas, and a large share of the formal sector, a 13th-month payment — usually one month's salary paid in December — has become a normal expectation. But "normal" is not the same as "mandatory."

A 13th-month payment in Nigeria is contractual or discretionary, never statutory. Whether you owe it depends entirely on what is written in the contract, the staff handbook, or an established, consistent policy — not on the law.

This distinction matters for two reasons:

• If it is in the contract or policy, it becomes an enforceable term. Withholding it can be a breach.
• If it is purely discretionary, you may vary or pause it — but do so carefully and consistently, because a benefit paid every year for years can harden into an implied term.

Either way, the moment you pay it, the tax treatment is identical: it is taxable employment income.

Why the bonus is taxable

The NTA 2025 defines employment income broadly. It captures all forms of reward from employment — salaries, wages, fees, allowances, compensations, bonuses, premiums, benefits, and any other perquisite an employer grants an employee. A 13th-month payment sits squarely inside that definition.

There is no special "bonus rate" and no exemption band that shelters year-end pay. The bonus is simply added to the employee's taxable income and taxed under the same PAYE bands as the rest of their earnings.

One nuance the NTA 2025 clarifies is timing. Regular salary accrues day to day, but one-off payments such as bonuses and commissions are treated as taxable on the date they are actually paid (or, where paid after employment ends, on the last day of employment). So a bonus paid in December falls into that period's PAYE computation — it does not get spread backward across the year.

The 2026 PAYE bands

Bonuses are taxed at the employee's marginal rate, so you need the current bands to see the impact. Under the NTA 2025, effective 1 January 2026, the annual personal income tax bands are:

Annual taxable income (₦)	Rate
First 800,000	0%
Next 2,200,000 (up to 3,000,000)	15%
Next 9,000,000 (up to 12,000,000)	18%
Next 13,000,000 (up to 25,000,000)	21%
Next 25,000,000 (up to 50,000,000)	23%
Above 50,000,000	25%

Source: PwC Tax Summaries — Nigeria, Taxes on personal income. The NTA 2025 also abolished the Consolidated Relief Allowance and the 1% minimum tax, and replaced the CRA with a Rent Relief of min(20% × annual rent, ₦500,000). Pension remains 8% employee on basic, housing and transport, and NHF (2.5% of basic) is now voluntary. Confirm current figures with the Nigeria Revenue Service (NRS), the renamed FIRS that administers the Act.

Worked example: the tax on a ₦500,000 bonus

Meet Ada, a mid-level manager.

• Annual gross salary: ₦6,000,000
• Pension (8% of basic + housing + transport): ₦288,000 deductible
• Rent relief (annual rent ₦1,200,000 → min(20% × 1,200,000, 500,000)): ₦240,000
• NHF: opted out (voluntary), so ₦0

Her taxable income before any bonus:

₦6,000,000 − ₦288,000 − ₦240,000 = ₦5,472,000

Tax on ₦5,472,000, band by band:

Band	Amount taxed (₦)	Rate	Tax (₦)
First 800,000	800,000	0%	0
Next 2,200,000	2,200,000	15%	330,000
Remainder to 5,472,000	2,472,000	18%	444,960
Total			774,960

Now Ada receives a ₦500,000 13th-month bonus in December. It does not attract additional pension (it is not part of her basic/housing/transport), so the full ₦500,000 is added to taxable income:

₦5,472,000 + ₦500,000 = ₦5,972,000

Her taxable income is still inside the 18% band (which runs up to ₦12,000,000), so the entire bonus is taxed at 18%.

Band	Amount taxed (₦)	Rate	Tax (₦)
First 800,000	800,000	0%	0
Next 2,200,000	2,200,000	15%	330,000
Remainder to 5,972,000	2,972,000	18%	534,960
Total			864,960

The tax cost of the bonus:

₦864,960 − ₦774,960 = ₦90,000 — which is exactly 18% × ₦500,000.

Ada's ₦500,000 bonus is taxed at her marginal rate of 18%, costing ₦90,000 in extra PAYE. She takes home ₦410,000 net.

What if the bonus crosses a band?

The bonus is not taxed at a single flat rate if it straddles a threshold — only the portion that spills into the higher band is taxed higher. Suppose an employee's taxable income before bonus is ₦11,800,000 (top of the 18% band is ₦12,000,000) and they receive a ₦600,000 bonus:

• The first ₦200,000 of the bonus (bringing them to ₦12,000,000) is taxed at 18% = ₦36,000
• The remaining ₦400,000 falls into the 21% band = ₦84,000
• Total tax on the bonus: ₦120,000

This "band-crossing" arithmetic is where manual payroll and spreadsheets most often go wrong — people apply one rate to the whole bonus and either over- or under-deduct.

Honest limit

Two things to be clear about. First, this covers cash bonuses. Non-cash rewards (a car, a paid holiday) are benefits-in-kind with their own valuation rules — confirm treatment with the NRS. Second, a bonus does not change your pension or NHF base unless your policy explicitly builds it into basic, housing or transport; most 13th-month payments do not, which is why we excluded pension on the bonus above. If your contract defines it differently, follow the contract.

Does AnooreHR handle this?

Yes. AnooreHR's payroll engine runs the 2026 PAYE bands as a country profile pack — the rates, thresholds and reliefs live in data, so band-crossing math on a December bonus is handled automatically, deducted correctly, and posted straight into your general ledger on one shared ledger. Nigeria is live today. Add the bonus as a payroll line, and every employee sees the correct net on their self-service payslip. Start free with AnooreHR or book a quick demo to see a full December run.

Related reading: How to Compute PAYE in Nigeria, Nigerian Pension Contribution Guide, Nigerian Labour Act Leave Entitlements 2026