Nigeria’s tax administration

As of January 2026, Nigeria’s personal income tax (PIT) regime has been updated under the Nigeria Tax Act 2025, introducing a higher tax-free threshold and a simplified progressive tax structure.

Contents

Current Personal Income Tax Brackets (2026 Onward)

Steps to Calculate Your Taxable Income

1. Determine Your Gross Income

2. Subtract Allowable Deductions and Reliefs

3. Arrive at Taxable Income

4. Apply the Progressive Tax Rates

Worked Example

Tax Breakdown:

Important Notes

Personal income tax applies to:

*Residents: on worldwide income

*Non-residents: on Nigeria-sourced income

For employees, tax is usually deducted at source under the Pay-As-You-Earn (PAYE) system.

Current Personal Income Tax Brackets (2026 Onward)

Nigeria operates a progressive tax system, meaning income is taxed in layers. Only the portion of income within each band is taxed at the applicable rate.

Annual Taxable Income (₦) Tax Rate

First ₦800,000 0%

Next ₦1,400,000 (₦800,001 – ₦3,000,000) 15%

Next ₦9,000,000 (₦3,000,001 – ₦12,000,000) 18%

Next ₦13,000,000 (₦12,000,001 – ₦25,000,000) 21%

Next ₦25,000,000 (₦25,000,001 – ₦50,000,000) 23%

Above ₦50,000,000 25%

Your tax bracket refers to the highest (marginal) rate that applies to any portion of your income.

For example:

₦10 million → 18% bracket

₦60 million → 25% bracket

Steps to Calculate Your Taxable Income

1. Determine Your Gross Income

Add all annual earnings, including:

Salary and wages

Bonuses and allowances

Business or professional income

Rental income and other earnings

2. Subtract Allowable Deductions and Reliefs

These include:

Pension contribution: 8% of salary (employee portion)

National Housing Fund (NHF) (where applicable)

Rent relief: higher of ₦500,000 or 20% of annual rent paid

Other approved deductions (e.g. life insurance premiums, eligible mortgage interest)

Note: The former Consolidated Relief Allowance (CRA) has been abolished.

3. Arrive at Taxable Income

Taxable income = Gross income – deductions and reliefs

4. Apply the Progressive Tax Rates

Tax each portion of income according to the applicable band.

Worked Example

Annual gross salary: ₦15,000,000

Pension (8%): ₦1,200,000

Rent relief: ₦600,000

Taxable income:

₦15,000,000 − ₦1,200,000 − ₦600,000 = ₦13,200,000

Tax Breakdown:

First ₦800,000 @ 0% = ₦0

Next ₦2,200,000 @ 15% = ₦330,000

Next ₦9,000,000 @ 18% = ₦1,620,000

Remaining ₦1,200,000 @ 21% = ₦252,000

Total tax payable: ₦2,202,000

Marginal tax rate: 21%

Effective tax rate: ~16.7%

Important Notes

Low-income earners, including those below the minimum wage threshold, may be fully exempt.

PAYE administration may vary slightly by state.

For exact figures, taxpayers should consult their state internal revenue service or a licensed tax professional. (Nigerian Tribune)

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