In short: The Nigeria Tax Act 2025 took effect on 1 January 2026. It replaces the personal income tax bands that had been in place since 2011 with a new 0% to 25% scale, scraps the Consolidated Relief Allowance and puts a rent relief in its place, exempts anyone earning the national minimum wage from PAYE entirely, and sets company income tax at 0% for small companies. If you run a business in Nigeria, two things change on your side: what you deduct from staff salaries every month, and whether you owe company income tax at all.
This is a working guide, not a legal opinion. Every figure below is from the Act as signed, and the worked examples are calculated in full so you can check them against your own payroll.
The new PAYE bands
Personal income tax is now charged on these bands of annual chargeable income, meaning what remains after your allowable deductions, not your gross salary.
| Annual chargeable income (₦) | Rate |
|---|---|
| First 800,000 | 0% |
| Next 2,200,000 | 15% |
| Next 9,000,000 | 18% |
| Next 13,000,000 | 21% |
| Next 25,000,000 | 23% |
| Above 50,000,000 | 25% |
The bands are cumulative. You do not pay 21% on everything once you cross into the 21% band, only on the portion that falls inside it. The top rate rises from 24% to 25%, but the first ₦800,000 is now completely free of tax. Under the old scale the first naira of chargeable income was taxed at 7%.
Rent relief replaces the Consolidated Relief Allowance
This is the change most people miss, and it is the one that decides whether you personally pay more or less.
The Consolidated Relief Allowance is gone. It used to give every taxpayer the higher of ₦200,000 or 1% of gross income, plus 20% of gross income, deducted before tax was calculated. On a ₦12m salary that was a deduction of ₦2.6m before you counted anything else.
In its place is rent relief: the lower of 20% of the annual rent you actually paid or ₦500,000.
- It is capped. The most anyone can claim is ₦500,000 a year.
- It is not automatic. You have to have paid rent, and you should expect to evidence it.
- If you own your home outright or live rent-free, you claim nothing.
What still comes off before tax: pension contributions at 8% of basic, housing and transport allowances; National Housing Fund contributions; National Health Insurance contributions; and life assurance premiums. These are unchanged and all need documentation.
A worked example
Take an employee on ₦12,000,000 a year paying ₦1,000,000 a year in rent, on a typical structure where basic, housing and transport make up 80% of the package.
| Step | Amount (₦) |
|---|---|
| Gross annual income | 12,000,000 |
| Less pension (8% of ₦9,600,000) | (768,000) |
| Less rent relief (20% of ₦1,000,000, under the cap) | (200,000) |
| Chargeable income | 11,032,000 |
| Band | Amount taxed (₦) | Rate | Tax (₦) |
|---|---|---|---|
| First 800,000 | 800,000 | 0% | 0 |
| Next 2,200,000 | 2,200,000 | 15% | 330,000 |
| Next 9,000,000 | 8,032,000 | 18% | 1,445,760 |
| Total | 11,032,000 | 1,775,760 |
Annual PAYE of ₦1,775,760, which is ₦147,980 a month. The effective rate on gross pay is 14.8%. Run your own numbers in the PAYE calculator.
Who pays less, and who pays more
| Monthly gross (₦) | Old PAYE/month (₦) | New PAYE/month (₦) | Change |
|---|---|---|---|
| 70,000 | 2,834 | 0 | −2,834 |
| 100,000 | 5,540 | 4,040 | −1,500 |
| 300,000 | 33,535 | 33,044 | −491 |
| 500,000 | 66,987 | 66,740 | −247 |
| 1,000,000 | 155,307 | 150,980 | −4,327 |
| 1,500,000 | 243,627 | 247,340 | +3,713 |
| 2,000,000 | 331,147 | 345,620 | +14,473 |
| 4,500,000 | 766,747 | 880,500 | +113,753 |
Both columns assume 8% pension on basic, housing and transport at 80% of gross, and no rent relief claimed in the new column. Low and middle earners keep more, and the bill rises steadily above roughly ₦1.3m a month.
Nobody on minimum wage pays PAYE any more
An employee earning at or below the national minimum wage of ₦70,000 a month is no longer liable to personal income tax at all. If you employ people at or near that level, their PAYE deduction is now zero. A payroll template built before 2026 will keep deducting.
The business side: company income tax
Small companies pay 0% company income tax. They are also exempt from capital gains tax and from the new development levy. Everyone else pays 30%.
One point is genuinely unresolved. The Nigeria Tax Act defines a small company as one with gross turnover of ₦50m or less and fixed assets of ₦250m or less. The Nigeria Tax Administration Act, passed alongside it, uses ₦100m or less with the same asset test. If your turnover falls between the two, get your position confirmed in writing before you file. Companies providing professional services are excluded from small-company treatment regardless of turnover.
The development levy is a single 4% charge on assessable profits that consolidates the Tertiary Education Tax, NITDA levy, NASENI levy and Police Trust Fund levy. Small companies and non-resident companies do not pay it.
VAT: the rate holds, the rules move
The headline rate stays at 7.5%. Basic food items, medical and pharmaceutical products, educational books and tuition, medical equipment and residential rent are now zero-rated rather than exempt, which means you charge nothing but can still recover input VAT on your costs. Input VAT recovery now extends to services and capital expenditure. Invoicing is getting stricter: sequential invoice numbering and fiscalisation move from good practice to requirement, which is what the e-invoicing rollout enforces.
What to do before your next filing
- Update your payroll bands. Any spreadsheet still running the 7% to 24% scale is deducting the wrong amount every month.
- Zero out PAYE for minimum-wage staff. Check it rather than assume it.
- Collect rent evidence from employees who want the relief.
- Work out which side of the small-company line you fall on, and get it confirmed if you are between ₦50m and ₦100m.
- Fix your invoice numbering now. The invoice generator numbers sequentially by default.
- Separate capital expenditure in your books so input VAT on equipment can be reclaimed.