Nigeria PAYE Tax Guide 2026: Income Tax Brackets, Rates & Worked Examples

Nigeria’s personal income tax is governed by the Personal Income Tax Act (PITA), with PAYE deducted at source by employers for all employees working in Nigeria. The Federal Inland Revenue Service (FIRS) oversees federal employees, while State Internal Revenue Services administer PAYE for employees in their respective states. For Lagos-based employees, the Lagos State Internal Revenue Service (LIRS) handles assessment; each of the 36 states has its own SIRS. PITA rates are uniform nationally — states do not set different income tax rates.

The defining feature of Nigeria’s PAYE system is the Consolidated Relief Allowance (CRA): before any brackets are applied, employees deduct the higher of 20% of gross income or NGN 200,000, plus an additional fixed NGN 200,000. Added to this, pension contributions (8% under the Contributory Pension Scheme) and National Housing Fund (NHF) contributions (2.5% of basic salary) further reduce taxable income. The result is that many Nigerian employees pay a much lower effective rate than the headline 7%–24% brackets suggest. The tax year runs January 1 to December 31. This guide covers the 2026 brackets, the CRA calculation, worked examples at NGN 200,000, 500,000, and 1,000,000/month, and employer filing obligations.

Nigeria Income Tax Brackets 2026

Nigeria’s PITA brackets apply to taxable income after the Consolidated Relief Allowance (CRA), pension, NHF, and other approved deductions have been subtracted from gross income. The 2026 brackets are:

These rates apply to taxable income after the CRA and other deductions. A minimum tax rule applies: if total PAYE is less than 1% of gross income, PAYE is set at 1% of gross. This typically only affects employees with very high deductions relative to income.

State vs. Federal: PITA rates are uniform across all 36 states and the FCT. However, PAYE for private sector employees is remitted to the State Internal Revenue Service of the state where the employee works — not where the employer is registered. Verify the latest rates at firs.gov.ng.

Consolidated Relief Allowance (CRA) Explained

The CRA is the cornerstone of Nigeria’s PITA and the primary reason effective tax rates are well below headline brackets for most formal sector workers.

CRA formula: The higher of (a) 1% of gross income, or (b) NGN 200,000, plus 20% of gross income as an additional allowance.

In practice, for almost all employees, the formula works out as: NGN 200,000 + 20% of gross income (since 20% of gross will typically exceed the 1% alternative). Examples:

• At NGN 2,400,000/year gross (NGN 200,000/month): CRA = NGN 200,000 + (20% × 2,400,000) = NGN 200,000 + NGN 480,000 = NGN 680,000
• At NGN 6,000,000/year gross (NGN 500,000/month): CRA = NGN 200,000 + (20% × 6,000,000) = NGN 200,000 + NGN 1,200,000 = NGN 1,400,000
• At NGN 12,000,000/year gross (NGN 1,000,000/month): CRA = NGN 200,000 + (20% × 12,000,000) = NGN 200,000 + NGN 2,400,000 = NGN 2,600,000

Combined with pension (8%) and NHF (2.5%) deductions, a high proportion of gross income is shielded from tax before any bracket applies. Pension contributions are also fully deductible, making them tax-efficient in a way Kenya’s NSSF and Tanzania’s NSSF are not.

Worked Examples: PAYE at Common Salary Levels

Nigeria’s CRA significantly reduces taxable income before any brackets apply. The worked examples below show the full calculation sequence. We assume basic salary equals gross for simplicity — in practice, total emoluments may include housing and transport allowances which also affect the pension base.

Example 1: NGN 200,000/month (NGN 2,400,000/year gross)

• CRA: NGN 200,000 + 20% × NGN 2,400,000 = NGN 200,000 + NGN 480,000 = NGN 680,000
• Pension (8% of gross emoluments): NGN 192,000/year
• NHF (2.5% of basic): NGN 60,000/year
• Taxable income: NGN 2,400,000 − NGN 680,000 − NGN 192,000 − NGN 60,000 = NGN 1,468,000
• 7% × NGN 300,000 = NGN 21,000
• 11% × NGN 300,000 = NGN 33,000
• 15% × NGN 500,000 = NGN 75,000
• 19% × NGN 368,000 = NGN 69,920
• Annual PAYE: NGN 198,920 (~NGN 16,577/month)
• Effective PAYE rate on gross: approximately 8.3%
• Pension: NGN 16,000/month | NHF: NGN 5,000/month
• Net take-home: approximately NGN 162,423/month

Example 2: NGN 500,000/month (NGN 6,000,000/year gross)

• CRA: NGN 200,000 + 20% × NGN 6,000,000 = NGN 1,400,000
• Pension (8%): NGN 480,000/year
• NHF (2.5%): NGN 150,000/year
• Taxable income: NGN 6,000,000 − NGN 1,400,000 − NGN 480,000 − NGN 150,000 = NGN 3,970,000
• 7% × NGN 300,000 = NGN 21,000
• 11% × NGN 300,000 = NGN 33,000
• 15% × NGN 500,000 = NGN 75,000
• 19% × NGN 500,000 = NGN 95,000
• 21% × NGN 1,600,000 = NGN 336,000
• 24% × NGN 770,000 = NGN 184,800
• Annual PAYE: NGN 744,800 (~NGN 62,067/month)
• Effective PAYE rate on gross: approximately 12.4%
• Pension: NGN 40,000/month | NHF: NGN 12,500/month
• Net take-home: approximately NGN 385,433/month

Example 3: NGN 1,000,000/month (NGN 12,000,000/year gross)

• CRA: NGN 200,000 + 20% × NGN 12,000,000 = NGN 2,600,000
• Pension (8%): NGN 960,000/year
• NHF (2.5%): NGN 300,000/year
• Taxable income: NGN 12,000,000 − NGN 2,600,000 − NGN 960,000 − NGN 300,000 = NGN 8,140,000
• Lower bands (7%–21%) on first NGN 3,200,000 = NGN 560,000
• 24% × NGN 4,940,000 = NGN 1,185,600
• Annual PAYE: NGN 1,745,600 (~NGN 145,467/month)
• Effective PAYE rate on gross: approximately 14.5%
• Pension: NGN 80,000/month | NHF: NGN 25,000/month
• Net take-home: approximately NGN 749,533/month

Use the Nigeria income tax calculator for a personalised figure. Actual take-home will vary based on the split between basic salary and allowances in your employment package.

Nigeria Pension (CPS) and NHF: Payroll Deductions

In addition to PAYE, Nigerian formal sector employees have two further mandatory deductions that are fully tax-deductible:

Contributory Pension Scheme (CPS) — 8% employee contribution

Under the Pension Reform Act 2014, employees contribute 8% of monthly total emoluments (basic salary plus housing allowance plus transport allowance) to a Retirement Savings Account (RSA) with a Pension Fund Administrator (PFA) of their choice. Employers contribute a minimum of 10% (some contribute 12% or higher). Contributions are invested by the PFA in a diversified portfolio. The employee selects their PFA from PENCOM-licensed providers; the employer remits combined contributions monthly to the selected PFA. Pension contributions are fully deductible from PAYE taxable income, making them significantly more tax-efficient than in Kenya or Tanzania.

National Housing Fund (NHF) — 2.5% of basic salary

Employees in the public sector and private companies with 10 or more employees contribute 2.5% of basic monthly salary to the Federal Mortgage Bank of Nigeria (FMBN). NHF contributions accumulate and can be accessed through NHF-backed mortgage loans for residential property purchase. NHF contributions are tax-deductible. The NHF is distinct from pension — it is a housing-specific fund rather than a retirement fund.

NSITF — Employer only (1%)

The National Social Insurance Trust Fund (NSITF) requires employers to contribute 1% of total emoluments for workplace injury insurance. This is an employer-only cost and does not reduce employee take-home pay.

Nigeria PAYE Filing: Employer and Employee Obligations

Nigeria PAYE is administered by State Internal Revenue Services (SIRS) for private sector employees. Key obligations:

• Monthly PAYE remittance: PAYE deducted from employees must be remitted to the relevant State IRS by the 10th of the following month. Most states now accept remittances via their online tax portals.
• Annual employer return: Employers file an annual PAYE return (Form H1) with their State IRS by 31 January showing total PAYE deducted from each employee during the preceding year.
• Employee annual return: Employees with non-PAYE income (business, rental, investment) must file an annual return with their State IRS by 31 March. PAYE withheld is credited against the annual liability.
• TIN registration: All employees must have a Tax Identification Number (TIN). Registration is available through FIRS (tin.firs.gov.ng) or State IRS offices. TIN is required for banking, property transactions, vehicle registration, and most formal commercial activities.
• Tax Clearance Certificate (TCC): Required for government contracts, importing, and many professional licences. Apply through your State IRS or FIRS after filing all returns and settling outstanding tax. Issued for three years.