Under the Nigeria Tax Act 2025, which officially took effect on January 1, 2026, the PAYE (Pay-As-You-Earn) system has undergone its most significant overhaul in decades.
The new law introduces a more progressive structure that eliminates the old "Consolidated Relief Allowance" (CRA) and replaces it with a higher tax-free threshold and a specific Rent Relief.
1. The New PAYE Tax Brackets (2026)
The tax-free threshold has been raised to ₦800,000 annually. If you earn this amount or less (approx. ₦66,667 monthly), you pay 0% tax.
| Annual Taxable Income (₦) | Tax Rate |
|---|---|
| First ₦800,000 | 0% (Tax-Free) |
| 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% |
2. Major Changes in Deductions & Reliefs
The 2025 Act removed the automatic "20% of gross + ₦200k" relief (CRA) that everyone used to get. Instead, we now have:
- Rent Relief (New): You can deduct 20% of your annual rent paid, capped at a maximum of ₦500,000. To claim this, you must provide proof of rent payment to the tax authorities.
- Abolition of Minimum Tax: The old "1% minimum tax" for people with no taxable income has been abolished. If your deductions exceed your income, you truly pay zero tax.
- Job Loss Protection: The tax-exempt threshold for "compensation for loss of office" (redundancy pay) has increased from ₦10 million to ₦50 million.
- Standard Deductions: Contributions to Pension (8%), National Housing Fund (2.5%), and National Health Insurance (NHIS) remain tax-deductible before arriving at your "taxable income."
3. Impact on Your Take-Home Pay
- Low Earners: Those earning around the minimum wage pay zero tax.
- Middle Earners: Generally see a slight decrease in their tax burden because of the expanded 0% and 15% bands.
- High Earners: Those earning above ₦50 million will see a slight increase as the top rate is now 25% (up from 24%) and they no longer benefit from the broad CRA.
Example Calculation (Annual)
If your taxable income (after pension/NHF) is ₦5,000,000:
- First ₦800k @ 0% = ₦0
- Next ₦2.2m @ 15% = ₦330,000
- Remaining ₦2m @ 18% = ₦360,000Total Annual Tax: ₦690,000
Note on Capital Gains: For individuals, Capital Gains Tax (CGT) is no longer a flat 10%. It is now merged with your personal income and taxed at these same progressive rates (0%–25%).