Under the Nigeria Tax Act 2025, which took effect on 1 January 2026, personal income tax moved to a new progressive structure. For employers, this means PAYE calculations have to be rebuilt, not just adjusted.
The new bands
The first ₦800,000 of taxable income each year is taxed at 0%. Above that, rates step up through 15%, 18%, 21% and 23% to a top rate of 25% as income rises. This replaces the previous structure, which ran from 7% to 24%.
Reliefs have changed too
The consolidated relief allowance no longer exists. In its place, the Act allows a rent relief equal to 20% of annual rent paid, capped at ₦500,000, along with other allowable reliefs such as pension contributions. Employees who rent will want to keep rent receipts or agreements on file.
A payroll checklist for employers
- Update the PAYE bands and reliefs in your payroll software or spreadsheet.
- Recompute net pay for a sample of staff at different salary levels and compare it with the old calculation.
- Tell employees what is changing before the payslip does it for them.
- Collect the documents needed to support relief claims, such as rent and pension records.
- Keep your monthly remittance dates and records in order.
Why this matters
Most employees at lower income levels will see their tax fall, while higher earners may see a different result depending on their reliefs. Getting the calculation right protects both your staff and your company from under-deductions that surface later.
Our training calendar includes a dedicated course on VAT, withholding tax, PAYE and personal income tax administration for finance and HR teams.
This article is general information, not tax, legal or financial advice. Rules change and every business is different, so speak to a qualified professional about your situation.
