Nigeria's new Tax Act, effective 1 January 2026, makes the first ₦800,000 of annual income tax-free, then taxes income from 15% up to 25% above ₦50 million. It replaces the old Consolidated Relief Allowance with a clearer ₦800,000 band plus rent relief and the 8% pension deduction.
The 2026 reform is the biggest change to Nigerian personal income tax in years, and it reshapes how PAYE is calculated. This guide breaks down the new bands and reliefs and shows what they mean for your take-home pay. To run your own figures, use our Nigeria income tax calculator.
The new PAYE bands (2026)
- 0% on the first ₦800,000
- 15% on the next ₦2,200,000 (up to ₦3 million)
- 18% on the next ₦9,000,000 (up to ₦12 million)
- 21% on the next ₦13,000,000 (up to ₦25 million)
- 23% on the next ₦25,000,000 (up to ₦50 million)
- 25% on income above ₦50,000,000
These are marginal bands — each rate applies only to the income within that band, so a pay rise never reduces your take-home.
Reliefs: pension and rent
Two main reliefs reduce your taxable income before the bands are applied:
- Pension — your 8% employee contribution is deductible and goes into your Retirement Savings Account.
- Rent relief — you can deduct 20% of your annual rent, capped at ₦500,000.
Together with the ₦800,000 tax-free band, these replace the old Consolidated Relief Allowance, which the new law removes. For many low- and middle-income earners, the reforms reduce the overall PAYE burden.
A worked example: ₦5,000,000
On a ₦5,000,000 salary with the 8% pension on (₦400,000) and no rent relief, taxable income is ₦4,600,000. Tax is 0% on the first ₦800,000, 15% on the next ₦2,200,000 (₦330,000) and 18% on the remaining ₦1,600,000 (₦288,000) — about ₦618,000 in PAYE. After pension and tax, take-home is roughly ₦3,982,000 a year, an effective deduction of about 20.4%. Claiming rent relief would lower the tax further.
What it means for you
The headline win is the ₦800,000 tax-free band, which removes many low earners from the tax net entirely. Middle earners benefit from the wide 15% and 18% bands, while the top 25% rate applies only to very high incomes. As always, the exact figure depends on your reliefs — model yours in the calculator.
Related Calculators
- Nigeria Income Tax Calculator — PAYE, pension, rent relief and take-home.
- VAT Calculator — add or remove 7.5% VAT.
- Nigeria calculators hub — all NG tools.
Frequently Asked Questions
What are the new PAYE bands in Nigeria for 2026?
First ₦800,000 tax-free, then 15% to ₦3m, 18% to ₦12m, 21% to ₦25m, 23% to ₦50m and 25% above ₦50m.
How much income is tax-free?
The first ₦800,000; after pension and rent relief many lower earners pay little or no PAYE.
What is rent relief?
A deduction of 20% of annual rent, capped at ₦500,000.
Is the Consolidated Relief Allowance still available?
No — it is replaced by the ₦800,000 band, rent relief and the 8% pension deduction.