Understanding Nigeria's New PAYE Tax Law (2026): What Changed and What It Means for Your Salary

If your January 2026 salary alert looked different from what you expected, you're not imagining things. Nigeria's tax system changed on 1 January 2026 under the Nigeria Tax Act, and it rewrote how Pay-As-You-Earn (PAYE) is calculated for every salary earner in the country. Here's what actually changed, in plain language — no tax-office jargon.

The headline change: ₦800,000 is now tax-free

Under the old system, income tax applied from the very first naira you earned, once you subtracted the old Consolidated Relief Allowance. Under the new law, the first ₦800,000 of your chargeable income (not your full salary — more on that below) is taxed at 0%. If your annual chargeable income falls at or below that line, you owe nothing.

This alone is a meaningful shift for lower and entry-level earners, including many NYSC corps members and junior staff, who previously paid something regardless of how little they earned.

What "chargeable income" actually means

This is the detail people get wrong constantly. Your chargeable income is notyour gross salary — it's what's left after specific deductions are subtracted first:

• Pension contribution — typically 8% of your basic salary, housing, and transport allowance combined
• Rent relief — a new addition under this law. You can deduct 20% of the annual rent you pay, but this deduction is capped at ₦500,000, whichever figure is lower
• National Housing Fund (NHF) — 2.5% of basic salary, where applicable

Once these come off your gross pay, what remains is your chargeable income — and that's the figure the tax bands actually apply to.

The old Consolidated Relief Allowance is gone

Previously, every worker got a flat Consolidated Relief Allowance (CRA) — a percentage of income plus a fixed amount — as a blanket deduction regardless of personal circumstances. That's been scrapped and replaced by the rent relief described above. The practical effect: if you don't pay rent (say you live with family, or your employer provides housing), you'll have less to deduct than someone paying substantial rent, which is a real shift from the old flat-allowance approach.

Tax bands are progressive — and the top rate rose

Beyond the tax-free ₦800,000, your remaining chargeable income is taxed in progressive slices — meaning different portions of your income are taxed at different rates as you move up through brackets, similar in principle to the old system but with revised thresholds. The top marginal rate under the new law reaches 25% for very high earners, a modest rise from the old top rate, while the wide 0% band at the bottom is the part most workers will actually notice.

Because the exact bracket boundaries in the middle of the scale involve several tiers, the fastest and safest way to know your real number is to run your actual salary through a calculator built specifically on the current law — rather than eyeballing a table.

See your real number

We built our PAYE Tax Calculator specifically around the Nigeria Tax Act 2025, kept up to date as guidance is clarified. Enter your basic, housing, and transport figures, add your annual rent if you pay any, and it walks through pension, rent relief, and the tax bands automatically — showing your monthly PAYE and net take-home pay. It also includes an old-law-vs-new-law comparison toggle so you can see exactly how much changed for your specific salary.

Frequently asked questions

This article explains the general structure of the Nigeria Tax Act 2025 for informational purposes. Tax rules and their interpretation can be refined as official guidance develops — always confirm your specific figures with your employer's payroll department or a qualified tax professional.