PAYE Tax Calculator
Nigeria PAYE Tax Calculator 2026 Rates
Calculate your exact personal income tax, deductions, and net salary based on the Nigeria Tax Act 2025 effective January 1, 2026
New for 2026: Nigeria has introduced new tax brackets effective January 1, 2026. First ₦800,000 is now completely tax-free!
Enter Your Details
Your total annual income before any deductions
Bonuses, commissions, allowances (optional)
Tax Reliefs & Deductions
Maximum rent relief: ₦500,000 (20% of rent paid)
Your Tax Calculation (2026 Rates)
Tax Summary
AnnualTax Breakdown (2026 Rates)
(Total Tax ÷ Total Income) × 100
Enter your salary to begin
Fill in your annual salary above to see your detailed tax calculation
How Nigeria PAYE Tax Calculation Works (2026)
The Nigeria PAYE (Pay As You Earn) tax system deducts income tax directly from your salary each month. Our calculator uses the official NEW tax bands and rates from the Nigeria Tax Act 2025 effective January 1, 2026.
New 2026 Tax Calculation Formula
Taxable Income = Total Income − Allowable Deductions
Tax = Σ(Income in each tax band × Band rate) after ₦800,000 tax-free allowance
The tax is calculated progressively: different portions of your income are taxed at different rates. The new 2026 system introduces a significant tax-free allowance of ₦800,000.
Key Change for 2026
The first ₦800,000 of your annual taxable income is now completely tax-free. This is a major increase from previous systems and provides significant relief to lower and middle-income earners.
2026 Nigeria Tax Bands & Rates Effective Jan 1, 2026
| Annual Taxable Income (₦) | Tax Rate | Maximum Tax in Band | Cumulative Income |
|---|---|---|---|
| ₦0 – ₦800,000 | 0% | ₦0 | ₦800,000 |
| ₦800,001 – ₦3,000,000 | 15% | ₦330,000 | ₦3,000,000 |
| ₦3,000,001 – ₦12,000,000 | 18% | ₦1,620,000 | ₦12,000,000 |
| ₦12,000,001 – ₦25,000,000 | 21% | ₦2,730,000 | ₦25,000,000 |
| ₦25,000,001 – ₦50,000,000 | 23% | ₦5,750,000 | ₦50,000,000 |
| Over ₦50,000,000 | 25% | No limit | Unlimited |
Simple Example with 2026 Rates
If you earn ₦5,000,000 annually:
• First ₦800,000: ₦0 tax (0%)
• Next ₦2,200,000: ₦330,000 tax (15%)
• Next ₦2,000,000: ₦360,000 tax (18%)
Total Tax: ₦690,000 (Effective rate: 13.8%)
These new rates apply to your taxable income (after all allowable deductions). The first ₦800,000 is completely tax-free under the new 2026 system.
Allowable Deductions & Reliefs (2026 Rules)
The Nigeria Tax Act 2025 maintains most existing deductions while introducing the new tax-free allowance. These deductions are subtracted from your total income before applying the tax bands.
Pension Contributions
Your mandatory 8% pension contribution is fully deductible from taxable income.
National Housing Fund (NHF)
2.5% of your monthly salary (capped) contributes to NHF and is tax-deductible.
National Health Insurance (NHIS)
Your NHIS contributions are fully deductible from taxable income.
Life Insurance Premium
Premiums paid on life insurance policies for you or your spouse are deductible.
Rent Relief
You can claim 20% of your annual rent paid as a deduction, up to a maximum of ₦500,000. This is particularly valuable for those living in high-rent areas like Lagos, Abuja, or Port Harcourt.
To claim these deductions, ensure your employer has proper documentation. Self-employed individuals must maintain receipts and claim deductions during annual tax filing.
Frequently Asked Questions
Who needs to pay PAYE tax in Nigeria?
Basically, any individual earning an income from employment, trade, or business in Nigeria must pay tax. This includes Nigerians working for local companies and residents who earn income from abroad, provided they are based in Nigeria for more than 183 days a year.
What makes the 2025 Tax Act different?
The 2025 Act consolidates several older laws to make things clearer and introduces NEW tax brackets effective 2026. It reinforces that things like pension contributions and salary increases for low-income workers (earning under ₦100,000) get special treatment to help with the cost of living.
How do I handle taxes if I’m a remote worker for a UK or US company?
If you live in Nigeria and work remotely, your income is generally “derived from Nigeria” because you are doing the work here. You’ll likely need to register as a self-employed person under the same PAYE rules to stay compliant.
Where does my tax money go?
A portion of the tax collected goes toward the Development Levy, which the 2025 Act specifies is used for critical national services, including the Nigerian Army, Navy, and Police Force to improve security.
Is PAYE tax the same as income tax?
Yes, PAYE (Pay As You Earn) is simply the method of collecting income tax from employees. Instead of paying tax once a year, your employer deducts it monthly from your salary and remits it to the tax authorities.
Can I reduce my PAYE tax legally?
Yes, legitimate ways to reduce your tax include: maximizing voluntary pension contributions above the mandatory 8%, claiming relief on annual rent paid (up to ₦500,000), keeping records of donations to approved charities, and ensuring your employer correctly applies all eligible allowances and reliefs.
Common Questions & Scenarios
What if I have multiple income sources?
Combine all your annual income (salary, bonuses, commissions, freelance income) in the “Annual Gross Salary” and “Additional Annual Income” fields. The calculator will compute tax on your total income as required by Nigeria’s tax laws.
How does this work for non-resident Nigerians?
Nigerians living abroad who earn income in Nigeria must still pay Nigerian taxes on that income. Use the calculator with your Nigeria-sourced income only. Income earned and taxed abroad may qualify for double taxation relief.
What about the minimum wage exemption?
If you earn the national minimum wage or less, you’re exempt from income tax. The calculator automatically applies this exemption if your total income falls at or below the minimum wage threshold.
How accurate is this for self-employed individuals?
The calculator uses the same tax bands and rates that apply to self-employed persons. However, self-employed individuals can deduct legitimate business expenses before calculating taxable income, which isn’t covered in this basic calculator.
When should I review my tax calculations?
Review whenever your salary changes, you get a new job, you start additional income streams, or at least annually. Tax laws can change, and your financial situation evolves.
Why is my effective tax rate lower than my top band rate?
Because of Nigeria’s progressive tax system and your allowable deductions. Your effective tax rate is your total tax divided by your total income, which is always lower than your highest tax band rate.
Who Needs This Calculator?
Every Nigerian employee needs to understand their tax obligations. Whether you are a fresh graduate starting your first job, a mid-level professional negotiating a salary increase, or a senior executive planning your finances, this calculator helps you know exactly how much tax you will pay.
The calculator is especially useful for:
- Employees comparing job offers and want to know their take-home pay
- HR professionals processing payroll and need quick verification
- Freelancers and consultants who need to estimate taxes on contract income
- Accountants advising clients on tax planning
- Anyone who wants to verify their employer is deducting the correct tax amount
Why use this calculator?
Manual tax math is a headache. Between calculating 20% of gross plus 1% for relief and then moving through six different tax bands, it is easy to make a mistake. This tool handles the bands instantly so you know your exact take-home pay.
What Changed in the 2025 Tax Act (Effective 2026)?
The Nigeria Tax Act 2025 consolidated multiple tax laws and introduced significant changes that take effect in 2026. Understanding these changes is crucial for accurate tax calculation.
New Tax Brackets
Completely new tax bands with first ₦800,000 tax-free starting January 1, 2026
Consolidated Laws
Combines 12 different tax laws into one comprehensive Act for clarity and consistency
Simplified Deductions
Clear rules on pension (8% of gross salary) and National Housing Fund contributions (2.5% of gross salary)
Minimum Wage Exemption
Individuals earning the national minimum wage or less are fully exempt from income tax
Example Calculations (Table of Truth) 2026 Rates
Verify our calculator’s accuracy with these common salary scenarios using 2026 rates:
| Annual Salary | Total Deductions | Annual Tax (2026) | Monthly Tax | Net Salary |
|---|---|---|---|---|
| ₦1,200,000 | ₦180,000 | ₦16,500 | ₦1,375 | ₦1,183,500 |
| ₦2,500,000 | ₦350,000 | ₦165,000 | ₦13,750 | ₦2,335,000 |
| ₦5,000,000 | ₦620,000 | ₦690,000 | ₦57,500 | ₦4,310,000 |
| ₦10,000,000 | ₦900,000 | ₦1,836,000 | ₦153,000 | ₦8,164,000 |
| ₦25,000,000 | ₦1,200,000 | ₦5,310,000 | ₦442,500 | ₦19,690,000 |
Note: Deductions include typical pension, NHF, NHIS, and rent relief. Your actual deductions may vary based on your specific circumstances.
More Frequently Asked Questions
What happens if my employer does not deduct PAYE?
You are still responsible for paying income tax, even if your employer fails to deduct it. The tax authority can come after you directly for unpaid taxes, plus penalties and interest. Always ensure your employer is remitting your tax properly.
Do I need to file annual tax returns if PAYE is deducted?
Yes, all employees must file annual tax returns even when PAYE is deducted. This reconciles what was deducted monthly with what you actually owe for the year. You might get a refund if too much was deducted, or pay extra if too little was deducted.
How accurate is this calculator?
This calculator uses the official NEW rates from the Nigeria Tax Act 2025 effective 2026. It is accurate for basic salary calculations. However, your actual tax might differ if you have additional allowances, bonuses, or special circumstances. Always verify with your HR department or a tax professional for complex situations.
Smart Tax Planning Tips for 2026
For Employees
- • Ensure your employer uses correct 2026 rates from January
- • Claim all allowable deductions with proper documentation
- • Review your monthly payslips for accuracy
- • File annual tax returns even if tax is deducted at source
For Diaspora Nigerians
- • Declare Nigeria-sourced income (rentals, investments)
- • Keep records of foreign taxes paid for potential relief
- • Consider timing of income recognition across tax years
- • Consult a tax professional for complex situations
Tip: Prepare for the Nigeria Tax Act Changes
Use this calculator in December 2025 to plan for the 2026 tax year. The new ₦800,000 tax-free allowance means significant savings for most earners. If you receive a mid-year raise or bonus in 2026, recalculate to understand your new tax position under the new rates.
Remember, while this calculator provides accurate estimates based on the Nigeria Tax Act 2025 (effective 2026), always consult with a qualified tax professional for personal financial advice, especially for complex situations involving investments, multiple income streams, or international tax implications.
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