Nigerian PAYE from 1 January 2026
How Nigerian PAYE changed on 1 January 2026 under the Nigeria Tax Act 2025, the new bands and reliefs, and how Achekam payroll applies them.
By Achekam · · 4 min read · For Running a business businesses in Nigeria
In January 2026 many Nigerian employees opened their payslips and found their net pay had moved. Some took home more, some less, and almost nobody could explain why. The reason was the Nigeria Tax Act 2025, which replaced the old personal income tax rules from the first day of the year.
If you run payroll, your employees will ask you about it. This article sets out what changed, the bands and reliefs at the time of writing, and how Achekam's Nigerian payroll applies them.
The Nigeria Tax Act 2025 and when it started
The Nigeria Tax Act 2025 commenced on 1 January 2026. It repeals a long list of older laws, including the Personal Income Tax Act, the Companies Income Tax Act and the VAT Act. Tax periods before 1 January 2026 stay under the repealed laws, so December 2025 payroll is still governed by the old rules even if you correct it in 2026. The Federal Government's transition guidelines for the 2025 tax Acts explain the changeover.
One caution before the figures. Two official texts of the 2025 tax Acts exist: the version gazetted by the FIRS, now the Nigeria Revenue Service, and the National Assembly's copy of January 2026. Some figures differ between them. The NRS says it applies the gazetted laws, and re-gazetting has been ordered. If a figure matters to a decision, check it against the text the NRS applies.
The bands at the time of writing
From 1 January 2026, personal income tax on annual taxable income is charged in these bands:
| Annual taxable income | Rate |
|---|---|
| The first N800,000 | 0% |
| N800,000 to N3 million | 15% |
| N3 million to N12 million | 18% |
| N12 million to N25 million | 21% |
| N25 million to N50 million | 23% |
| Above N50 million | 25% |
The bands are progressive: each rate applies only to the slice of income inside its band. In words, an employee with taxable income of N3 million a year pays nothing on the first N800,000 and 15% on the rest up to N3 million. An employee earning more than N50 million pays 25% only on the part above N50 million, with the lower rates still applying to the slices below.
Rent relief and the end of the consolidated relief allowance
The consolidated relief allowance, which most employers built into payroll for years, is abolished. In its place, an employee can deduct rent relief: 20% of their annual rent, up to N500,000.
For payroll this means two practical changes. First, any formula that still calculates the old allowance must go. Second, rent relief depends on what each employee actually pays in rent, which payroll does not know until the employee tells you. Ask employees to declare their annual rent, keep the evidence they give you, and update it when their rent changes. An employee who rents a flat gets relief of a fifth of the rent, but never more than N500,000, however high the rent.
The minimum-wage exemption
Employees earning the national minimum wage of N70,000 a month are exempt from personal income tax under section 58 of the Act. For a business with junior staff on that wage, PAYE on their pay is nil, though they still appear on payroll schedules and returns.
The table a person confirms
Achekam's Nigerian payroll calculates PAYE on the Nigeria Tax Act 2025 bands, together with pension, the opt-in National Housing Fund, NSITF, the ITF levy, rent relief and the minimum-wage exemption. All of it comes from a table a person confirms.
Achekam ships its payroll tables pre-loaded but unconfirmed. For Nigeria, the shipped table is for 2026. No payroll run uses it until a named person at your business confirms your own copy. Before you confirm, compare the bands, the rent relief limit and the minimum wage in the table with the figures above and with the text the NRS applies. Confirming also asks you to choose the pension coverage threshold and give a reason, which is explained in the pension decision before your first Nigerian payroll.
Plan ahead for next year. Only the 2026 Nigerian table ships, and the app can confirm a table but not create or edit one, so a 2027 table cannot be set up in the app. Before your first January 2027 run, check whether a 2027 table is available, and if it is not, talk to your accountant about how January payroll will be handled.
Checking a payslip by hand
Once a year, pick two or three employees at different pay levels and check their PAYE by hand against the bands. Start from annual taxable income, take off rent relief where the employee declared rent, apply each band to its slice, and divide by twelve for the month. If your figure and the payslip disagree, look first at the inputs: a missing rent declaration, or an allowance treated wrongly. A hand check on a few payslips is the simplest way to confirm the confirmed table really does what you think.
Answering your employees
When someone asks why their pay changed, a short, honest answer works best:
- the tax law changed on 1 January 2026, with new bands;
- the old consolidated relief allowance is gone;
- rent relief may reduce their tax if they declare their rent;
- anyone on the national minimum wage pays no personal income tax.
Where each employee's PAYE is paid depends on where they live; see Nigerian PAYE by State: schedules and annual return. And if you are also setting up how customers pay you, collecting naira invoice payments online covers the other side of your cash flow.
Send every employee a short note asking them to declare their annual rent. It is the one input the new rules need that payroll cannot find on its own.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
