How the Nigeria PAYE calculation works in 2026

This calculator uses the individual income tax rules in the Nigeria Tax Act, 2025. The Act took effect on 1 January 2026.

For an employee, the calculator starts with annual gross taxable employment income. It then deducts eligible amounts entered by the user, including qualifying pension contributions, National Housing Fund contributions, qualifying health insurance contributions, eligible owner occupied housing loan interest, qualifying life insurance or annuity payments, and rent relief.

2026 individual income tax bands

After eligible deductions and reliefs, chargeable income is taxed progressively. This means each rate applies only to the part of income falling within that band.

Formula used

Rent relief

The Nigeria Tax Act allows qualifying rent relief equal to 20% of annual rent actually paid, subject to a maximum relief of ₦500,000. The Act also requires the taxpayer to accurately declare the rent paid and other information that may be required by the relevant tax authority.

For example, if annual rent is ₦1,200,000, 20% is ₦240,000, so the calculator uses ₦240,000 as rent relief. If annual rent is ₦4,000,000, 20% is ₦800,000, so the calculator limits the relief to ₦500,000.

Minimum wage exemption

The Nigeria Tax Act exempts employment income where the employee earns gross income at or below the national minimum wage. The current statutory minimum wage is ₦70,000 per month, or ₦840,000 over 12 months. The calculator therefore returns zero PAYE when annual gross employment income does not exceed ₦840,000.

The ₦70,000 minimum wage was signed into law in 2024, as confirmed by the State House.

Eligible deductions included in this calculator

Section 30 of the Nigeria Tax Act lists several deductions that can reduce an individual's chargeable income. This calculator lets you enter the relevant annual amount instead of assuming that every employee contributes the same amount.

• Contributions under the National Housing Fund.
• Eligible contributions under the statutory health insurance scheme.
• Contributions under the Pension Reform Act.
• Eligible interest on a loan used to develop an owner occupied residential house.
• Qualifying life insurance premiums or deferred annuity payments.
• Rent relief equal to 20% of rent paid, capped at ₦500,000.

Worked example

Suppose an employee earns ₦500,000 per month. That gives annual gross employment income of ₦6,000,000. Assume the employee has ₦480,000 of qualifying annual pension contributions and pays annual rent of ₦1,200,000.

Rent relief is 20% of ₦1,200,000, which is ₦240,000. Total deductions and relief are therefore ₦720,000. Chargeable income becomes ₦5,280,000.

The first ₦800,000 is taxed at 0%. The next ₦2,200,000 is taxed at 15%, while the remaining ₦2,280,000 is taxed at 18%. The calculator performs these steps automatically using the figures entered.

Common mistakes to avoid

• Do not enter net salary in the gross income field.
• Do not enter a monthly deduction in a field that asks for an annual amount.
• Do not enter your entire rent payment as rent relief. Enter the rent paid and let the calculator apply the 20% rule and ₦500,000 cap.
• Do not add employer pension contributions to your personal deduction unless they form part of an amount that is legally deductible by you.
• Include taxable allowances and other taxable employment income when determining gross taxable employment income.

Why another PAYE calculator may give a different result

Some calculators still use the tax bands and Consolidated Relief Allowance that applied before the Nigeria Tax Act, 2025 took effect. Others may assume pension or housing fund contributions automatically, use a different definition of gross income, or omit the new rent relief. Differences can also arise from payroll rounding and from how an employer handles benefits, irregular payments, bonuses, or tax adjustments during the year.

Limitations

This calculator is an estimate for ordinary employment income. It does not determine the tax treatment of every possible benefit, foreign income item, business income, capital gain, tax credit, double taxation issue, or unusual employment arrangement.

Actual payroll withholding can also differ during individual months because employers may make cumulative adjustments, process bonuses, or correct earlier payroll figures. For a formal assessment or a complex situation, the relevant tax authority or a qualified tax professional can confirm the treatment.

Methodology and sources

The calculation follows section 30 and the Fourth Schedule of the Nigeria Tax Act, 2025 published by the National Assembly. Section 30 sets out eligible deductions and rent relief, while the Fourth Schedule specifies the progressive individual income tax bands.

The Act states that it applies from 1 January 2026. The commencement of the new tax laws was also confirmed by the State House.

Methodology last reviewed: 23 September 2026