How to Calculate Your PAYE Tax in Nigeria (2026 New Tax Law)

What Is PAYE Tax?

PAYE (Pay As You Earn) is the system through which employers deduct income tax from employees' salaries before paying them. If you earn a salary in Nigeria, your employer is required by law to calculate and remit your PAYE tax to the relevant state or federal tax authority every month.

As of 1 January 2026, the Nigeria Tax Act (NTA) 2025 replaced the old Personal Income Tax Act (PITA). This means the tax bands, reliefs, and calculation method have all changed. If your payslip still references CRA (Consolidated Relief Allowance), your employer may be using the old system — and you could be overpaying.

The New 2026 Tax Bands

Under the NTA 2025, your annual taxable income is taxed using these progressive bands:

The biggest change? The first ₦800,000 of your income is completely tax-free. Under the old system, this threshold didn't exist in the same way — instead, you had the CRA which has now been abolished.

What Reliefs Can You Claim?

Under the new law, the old CRA is gone. Instead, you can claim:

• Rent Relief: 20% of your annual rent paid, up to a maximum of ₦500,000 per year. You need to keep your tenancy agreement and rent receipts.
• Pension Contribution: Your mandatory employee pension contribution (typically 8% of Basic + Housing + Transport) is deducted before tax.
• National Housing Fund (NHF): 2.5% of your basic salary.
• National Health Insurance (NHIS): 5% of your basic salary.
• Voluntary Pension: Any additional voluntary pension contributions are also tax-deductible.
• Life Insurance: Premiums you pay on life insurance policies.

Worked Example: ₦500,000 Monthly Salary

Let's calculate the PAYE tax for someone earning ₦500,000 per month, with a typical salary structure:

Monthly Salary Breakdown:

• Basic Salary: ₦250,000 (50%)
• Housing Allowance: ₦100,000 (20%)
• Transport Allowance: ₦50,000 (10%)
• Other Allowances: ₦100,000 (20%)

Annual Gross Income: ₦500,000 × 12 = ₦6,000,000

Statutory Deductions (Annual):

• Pension (8% of Basic + Housing + Transport): ₦250,000 + ₦100,000 + ₦50,000 = ₦400,000 × 8% × 12 = ₦384,000
• NHF (2.5% of Basic): ₦250,000 × 2.5% × 12 = ₦75,000
• NHIS (5% of Basic): ₦250,000 × 5% × 12 = ₦150,000

Total Reliefs: ₦384,000 + ₦75,000 + ₦150,000 = ₦609,000

Taxable Income: ₦6,000,000 − ₦609,000 = ₦5,391,000

Tax Computation:

• First ₦800,000 at 0% = ₦0
• Next ₦2,200,000 at 15% = ₦330,000
• Remaining ₦2,391,000 at 18% = ₦430,380

Total Annual Tax: ₦760,380 Monthly PAYE: ₦63,365

Monthly Take-Home: ₦500,000 − ₦63,365 − ₦32,000 (pension) − ₦6,250 (NHF) − ₦12,500 (NHIS) = ₦385,885

Worked Example: ₦300,000 Monthly Salary

For a ₦300,000 monthly salary with Basic (₦150,000), Housing (₦60,000), Transport (₦30,000), Others (₦60,000):

• Annual Gross: ₦3,600,000
• Pension: ₦230,400
• NHF: ₦45,000
• NHIS: ₦90,000
• Taxable Income: ₦3,234,600
• Tax: ₦0 + ₦330,000 + (₦234,600 × 18%) = ₦372,228
• Monthly PAYE: ₦31,019

Worked Example: ₦1,000,000 Monthly Salary

For a ₦1,000,000 monthly salary with Basic (₦500,000), Housing (₦200,000), Transport (₦100,000), Others (₦200,000):

• Annual Gross: ₦12,000,000
• Pension: ₦768,000
• NHF: ₦150,000
• NHIS: ₦300,000
• Taxable Income: ₦10,782,000
• Tax: ₦0 + ₦330,000 + (₦9,000,000 × 18%) = ₦330,000 + ₦1,620,000 = ₦1,950,000

Wait — we only have ₦9,982,000 of taxable income remaining after the first ₦800,000. Let me recalculate:

• First ₦800,000 at 0% = ₦0
• Next ₦2,200,000 at 15% = ₦330,000
• Remaining ₦7,782,000 at 18% = ₦1,400,760

Total Annual Tax: ₦1,730,760 Monthly PAYE: ₦144,230

Don't Calculate Manually — Use MyTax Nigeria

These calculations get complex fast, especially when you add rent relief, voluntary pension, life insurance, and cooperative deductions. That's exactly why we built MyTax Nigeria — enter your salary breakdown and get your exact PAYE tax, net take-home pay, and full payslip breakdown in seconds.

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Key Takeaways

1. The NTA 2025 replaced the old PITA system effective 1 January 2026.
2. The first ₦800,000 of annual income is now completely tax-free.
3. CRA has been abolished and replaced with Rent Relief (20% of rent, max ₦500,000).
4. Pension, NHF, and NHIS remain deductible before tax.
5. If your payslip still shows CRA, talk to your employer — they may be using the old calculation.