PAYE Tax Bands
New 2025 PAYE structure
PAYE Tax Bands 2025
Pay As You Earn (PAYE) is deducted by your employer from your monthly salary. The Nigeria Tax Act 2025 (effective 1 January 2026) replaces the old Consolidated Relief Allowance with a Rent Relief and introduces a progressive 6-band structure (0%–25%). The first ₦800,000 of annual income is completely tax-free, and the old 1% minimum tax is abolished.
First ₦800,000
(₦0 – ₦800,000)
Tax
₦0
Next ₦2,200,000
(₦800,001 – ₦3,000,000)
Tax
Up to ₦330,000
Next ₦9,000,000
(₦3,000,001 – ₦12,000,000)
Tax
Up to ₦1,620,000
Next ₦13,000,000
(₦12,000,001 – ₦25,000,000)
Tax
Up to ₦2,730,000
Next ₦25,000,000
(₦25,000,001 – ₦50,000,000)
Tax
Up to ₦5,750,000
Above ₦50,000,000
(₦50,000,001+)
Tax
On the excess
₦500,000/month earner (2026)
Annual gross: ₦6M → First ₦800,000 tax-free, then 15% & 18% bands apply. After pension (₦480K) the chargeable income is ~₦4.72M → PAYE ≈ ₦80,000/month (before any Rent Relief).
✅ At or below ₦70,000/month
National minimum wage earners (₦70,000/month = ₦840,000/year) fall within the 0% band — fully exempt from PAYE
🏢 Employer obligation (2026)
PAYE must be deducted at source monthly and remitted to the relevant SIRS within 10 days of month-end. Penalty: 10% + 27.5%+ interest
* Rates apply to annual chargeable income after all allowable deductions. Effective from 1 January 2026. Source: Nigeria Tax Act 2025 (NTA 2025) / NRS (Nigeria Revenue Service, formerly FIRS).
VAT Changes
VAT improvements & updates
VAT Changes Under the 2025 Act
The standard VAT rate stays at 7.5%, but key improvements have been made — particularly for small businesses, food exemptions, and refund timelines.
| Aspect | Before | Now (2025) | Status |
|---|---|---|---|
| Standard Rate | 7.5% | 7.5% (maintained from 2020) | SAME |
| Registration Threshold | ₦25M annual turnover | ₦25M annual turnover (under review for upward revision) | SAME |
| Exempt Supplies — Food | Basic staples only | All unprocessed & primary food items exempt (effective Jan 2026) | IMPROVED |
| Small Business Exemption | No formal threshold | Under ₦25M annual turnover fully exempt — NTA 2025 | IMPROVED |
| Digital Services | Partially covered | Non-resident digital firms (Netflix, Google, Meta etc.) must register with FIRS & charge VAT | NEW |
| Refund Processing | No set timeline (years of delays) | FIRS mandated to refund within 90 days — NTA 2025 | IMPROVED |
| Input VAT Deduction | Restricted to taxable supplies only | Mixed supplies businesses can now apportion and claim input VAT | IMPROVED |
| Penalty for Late Remittance | Discretionary | 5% p.a. on unpaid VAT + CBN MPR interest — fully codified | NEW |
Important for Small Businesses
If your annual turnover is below ₦25 million, you are NOT required to charge or remit VAT. But if you receive a VAT invoice from a registered supplier, you still need to pay it.
Company Tax (CIT)
CIT tiering & reliefs
Company Income Tax (CIT) Rates
The Nigeria Tax Act 2025 (effective 1 January 2026) sets a two-tier CIT system: small companies (turnover ≤ ₦100M and fixed assets < ₦250M) pay 0%, while all other companies pay 30%. The old medium-company 20% band and the ₦25M threshold have been removed, and a flat 4% Development Levy replaces the Education Tax and three other sector levies.
Small Companies (turnover ≤ ₦100M & fixed assets < ₦250M)
Fully exempt from CIT, CGT & Development Levy — landmark NTA 2025 reform
Large / Other Companies (> ₦100M turnover)
Standard CIT rate — NTA 2025 (sectoral rate differentiation removed)
Pioneer Status (approved holiday)
0% CIT for the approved period — NIPC / Incentives Act
Development Levy (on non-small companies)
4% of assessable profit — replaces Education Tax + 3 other levies
Minimum Effective Tax Rate (large/MNE)
15% minimum ETR for ₦50bn+ turnover or MNE groups (€750m+ global)
Upstream Petroleum (PPTA)
Governed separately under the Petroleum Profit Tax Act
🎯 Key Reforms for 2026
- ✓Small company exemption: 0% CIT for companies with turnover ≤ ₦100M and fixed assets < ₦250M — also exempt from CGT and the Development Levy.
- ✓No medium band: The old ₦25M–₦100M 20% tier is removed — companies are either small (0%) or large (30%).
- ✓Development Levy: A flat 4% of assessable profit replaces the Education Tax and three other levies (small companies exempt).
- ✓Minimum ETR 15%: Large companies (₦50bn+ turnover) or MNE groups must meet a 15% effective tax rate.
Tax Reliefs
Deductions & allowances
Reduce What You Owe
You can legally reduce your taxable income by claiming these deductions before your PAYE is computed. Most are automatically applied by your employer, but you may need to declare others in your annual return.
Consolidated Relief Allowance (CRA)
Higher of 20% of gross income or ₦200,000 deducted before computing PAYE — unchanged under NTA 2025
Pension Contribution (CPS)
8% employee + 10% employer contributions under PRA 2004 are fully deductible. With 2026 CBN MPR at 27.5%, this also grows tax-free
NHF Contribution
2.5% of basic salary to the National Housing Fund is tax-deductible. FMBN is expanding access to mortgage finance in 2026
Life Insurance Premium
Annual premiums on qualifying life assurance policies taken on your own life are deductible — no cap specified in NTA 2025
Mortgage Interest Relief
Interest paid on an owner-occupied residential mortgage is deductible. Relief is now more accessible given expanded FMBN lending
Rent Relief
20% of annual rent paid, capped at ₦500,000 per year — particularly valuable given Nigeria's rising rental costs in 2025/2026
Gratuity & Severance Pay
Statutory terminal benefits paid on exit from employment are exempt from PAYE up to NTA-prescribed limits
Disability & Medical Relief
Persons living with disabilities (PLWDs) are entitled to additional relief under the NTA 2025 — consult your SIRS for specific amounts
💡 Tip for Employers
Ensure you're applying CRA, pension, NHF, and NHIS deductions correctly in your PAYE calculations. Errors can trigger NRS assessments and penalties. Use an approved payroll software or consult a tax advisor to ensure compliance.
Compliance Guide
Stay compliant in 2026
How to Stay Tax Compliant
Follow these six steps to ensure full compliance with the Nigeria Tax Act 2025 and avoid penalties, interest charges, or enforcement actions.
1Register with NRS/SIRS (TIN)
Obtain your Tax Identification Number (TIN) at any NRS (Nigeria Revenue Service — formerly FIRS, rebranded effective January 1, 2026) or State IRS office, or online at tin.jtb.gov.ng. BVN/NIN-linked TIN issuance is now mandatory for individuals.
2Keep Proper Books of Account
Maintain records for a minimum of 6 years — receipts, invoices, bank statements, payroll records. From 2026, FIRS encourages electronic record-keeping via approved accounting software
3File Returns on Time
PAYE: monthly returns by the 10th. CIT: within 6 months of financial year-end. VAT: monthly by the 21st. Annual personal returns: by 31 March 2026 for 2025 income. All federal filings are now submitted to the NRS (Nigeria Revenue Service).
4Remit All Taxes Deducted
Employers must remit PAYE deductions within 10 days of month-end. Withholding Tax must be remitted within 30 days. Failure attracts 10% penalty + MPR interest (currently 27.5%)
5File Annual Self-Assessment
All individuals with income beyond PAYE employment must file a self-assessment return by 31 March annually. The 2025 tax year returns are due 31 March 2026
6Respond to NRS Assessments
You have 30 days to object to any NRS (Nigeria Revenue Service, formerly FIRS) or SIRS assessment in writing. In 2026, NRS is actively pursuing unpaid taxes — engage a qualified tax consultant promptly.
7Apply for Tax Clearance Certificate (TCC)
Required for government contracts, licences, and property transactions. Apply via the NRS e-TCC portal (previously FIRS portal) after filing 3 years of returns. Processing now targets 15 working days (as of 2026).
✅ Pro Tips for Compliance
- • Use approved e-invoicing platforms for VAT tracking
- • Set up monthly tax remittance calendars
- • Keep digital copies of all tax receipts
- • File before deadlines to avoid 10% penalties
⚠️ Common Penalties (2026)
- • Late PAYE remittance: 10% + 27.5% interest p.a.
- • Late VAT filing: 5% + CBN MPR interest
- • Late annual return: 10% of tax payable
- • Failure to register TIN: ₦50,000 fine
FAQs
Common questions answered
Frequently Asked Questions
Answers to the most common questions about the Nigeria Tax Act 2025 for individuals, employees, and small business owners.
Individuals whose annual chargeable income falls within the first ₦800,000 tax-free band are fully exempt from PAYE. Additionally, persons with disabilities (PWDs) and children under 21 in full-time education (with income below set thresholds) qualify for exemptions. Small business owners with turnover below ₦25M are also exempt from CIT.
Still Have Questions?
If your question isn't answered above, reach out to the Nigeria Revenue Service (NRS) or consult with a qualified tax professional.
Book a Tax Consultation