Nigeria’s New Tax Law and Your Salary: The ₦800,000 Exemption, New PAYE Bands, Rent Relief — and What to Check on Your Payslip

Since January, millions of Nigerian workers have stared at their payslips with the same question: did the new tax law make me richer or poorer? The confusion is understandable — this is the biggest rewrite of Nigeria’s tax system in decades, and most explainers are written for accountants, not for the person whose salary it actually touches.

Here’s the plain-language version. On 26 June 2025, President Tinubu signed four tax reform Acts — led by the Nigeria Tax Act (NTA) — which took effect on 1 January 2026, replacing the old Personal Income Tax Act and a stack of other laws. For salary earners, the headlines are genuinely significant: a tax-free threshold of ₦800,000 a year, a new six-band structure topping out at 25%, the abolition of the old Consolidated Relief Allowance (CRA), and a brand-new rent relief worth up to ₦500,000. This guide walks through who’s exempt, how PAYE is now calculated, worked examples at real salary levels, the new rules for freelancers and remote workers, and the payslip checks every employee should run this month.

📌 The one-line summary: if your annual chargeable income is ₦800,000 or less (roughly ₦66,667/month), you now pay zero income tax; above that, six progressive bands from 15% to 25% apply — and most low and middle earners come out paying less than under the old law, especially once the new rent relief is claimed.

What Changed: The Reform in 60 Seconds

The 2025 reform package contains four laws working together: the Nigeria Tax Act (the rules), the Nigeria Tax Administration Act (how they’re enforced), the Nigeria Revenue Service (Establishment) Act (FIRS is now the NRS), and the Joint Revenue Board Act (federal–state coordination). Together they repeal and replace the Personal Income Tax Act, Companies Income Tax Act, VAT Act, Capital Gains Tax Act and more — a full reboot, effective 1 January 2026.

For employees, three structural changes matter most:

1. A real tax-free floor. The first ₦800,000 of chargeable income is taxed at 0% — fully exempting minimum-wage earners (and, in practice, many NYSC corps members on the ₦77,000 allowance, depending on their total income picture).
2. New progressive bands, 0%–25%. Six brackets replace the old table, with the top 25% rate reserved for income above ₦50 million a year. Analyses consistently show lower effective rates for earners in the ₦1m–₦20m range.
3. CRA is gone; direct reliefs replace it. The old Consolidated Relief Allowance disappears. Instead, you reduce your taxable income with specific, documented reliefs — pension, NHF, NHIS, life insurance, owner-occupier mortgage interest, and the new rent relief.

The New PAYE Bands (Effective 1 January 2026)

Per the Act as analysed by the major tax firms, annual chargeable income is now taxed as follows:

The crucial phrase is chargeable income — not your gross salary. Chargeable income is what’s left after your reliefs are deducted, which is why the reliefs below are now the most important tax planning tools an ordinary worker has.

The Reliefs: How to Legally Shrink Your Taxable Income

• Pension contributions — your employee contribution (typically 8% of gross) remains deductible. (A bigger pension contribution is now a direct tax saver — one more reason to take your PFA choice seriously.)
• National Housing Fund (NHF) — 2.5% of basic salary.
• NHIS/health insurance contributions — now explicitly tax-deductible.
• Life insurance premiums — qualifying premiums deductible.
• Owner-occupier mortgage interest — interest on a loan for building/buying your own home.
• ⭐ NEW: Rent relief — 20% of your annual rent, capped at ₦500,000. A tenant paying ₦1.5 million rent can deduct ₦300,000; rent of ₦2.5 million or more hits the ₦500,000 cap. To claim it, your rent must be declared and documentable — keep your tenancy agreement and payment receipts, and make sure payroll/HR captures it.

Benefits in kind (official cars, employer housing and similar perks) now follow defined valuation rules — for employer-provided assets, an annual value capped at 5% of the asset’s cost enters your PAYE base — so “soft” compensation is more systematically taxed even as cash reliefs expand.

Worked Examples: What Real Salaries Now Pay

Simplified illustrations using only the 8% pension deduction (no rent relief or other reliefs), to show the mechanics. Your numbers will differ — run your exact figures through our free PAYE calculator.

₦70,000/month (₦840,000/year): minus 8% pension (₦67,200) → chargeable income ₦772,800 — inside the ₦800,000 zero band. PAYE: ₦0. Minimum-wage and near-minimum earners are simply out of the tax net.

₦200,000/month (₦2.4m/year): minus pension (₦192,000) → chargeable ₦2,208,000. First ₦800k at 0%; remaining ₦1,408,000 at 15% = ₦211,200/year ≈ ₦17,600/month. Claim rent relief on, say, ₦1m rent (₦200,000 deduction) and chargeable income falls to ₦2,008,000 — PAYE drops to about ₦15,100/month.

₦500,000/month (₦6m/year): minus pension (₦480,000) → chargeable ₦5,520,000. 0% on ₦800k, 15% on ₦2.2m (₦330,000), 18% on the remaining ₦2,520,000 (₦453,600) = ₦783,600/year ≈ ₦65,300/month — before rent relief and other deductions trim it further.

The pattern across analyses is consistent: low earners exit the tax net entirely, and middle earners (₦1m–₦20m) see lower effective rates than under the old PITA table — provided their reliefs are actually captured.

Freelancers, Remote Workers and Side Hustles: The Loophole Closes

One change with teeth: Nigerian residents earning from foreign companies — remote workers, freelancers, contractors — are now squarely in scope. The Act requires registering with the Nigeria Revenue Service, self-declaring annual income, and paying tax on worldwide earnings even when paid offshore into dollar accounts. The era of foreign-paid income quietly escaping the net is formally over.

If that’s you: register, keep clean records of invoices and receipts, claim your legitimate reliefs like any other earner, and remember that multiple income streams must be aggregated — salary plus side hustle plus freelance income is one tax picture, not three invisible ones.

Small Businesses and Employers: The Other Side of the Deal

• Small companies with turnover below ₦50 million (and fixed assets under ₦250 million) are fully exempt from Companies Income Tax, Capital Gains Tax and the new 4% Development Levy — a genuine boost for SMEs and side-business owners.
• Employers get a 50% deduction on salaries of net-new hires kept for at least three years — a hiring incentive designed to push job creation.

Plus some humane clarifications: genuine gifts are not taxable, compensation for loss of employment has clearer non-taxable treatment, and selling your principal private residence (with up to one acre) enjoys a once-in-a-lifetime capital gains exemption.

Your Payslip Checklist for 2026

1. Is the ₦800,000 zero band applied? If your chargeable income is under it and PAYE is still being deducted, your payroll table is outdated.
2. Is CRA gone — and replaced correctly? Payslips still showing old CRA computations are running the repealed law.
3. Is your rent relief captured? It’s new, it’s worth up to ₦500,000 off your taxable income, and payroll won’t know your rent unless you declare it with documentation.
4. Are pension, NHF, NHIS and insurance deductions all reflected before tax is computed?
5. Does the math match? Run your gross through our PAYE calculator and compare with the deduction on your slip — then query HR with specifics, not vibes.

FAQ: Nigeria’s New Tax Law 2026

1. Who is exempt from income tax under the new law?

Anyone whose annual chargeable income is ₦800,000 or less (about ₦66,667/month) pays zero PAYE — covering minimum-wage earners and many low-income workers entirely.

2. When did the new tax law take effect?

1 January 2026. The four reform Acts — led by the Nigeria Tax Act — were signed on 26 June 2025 and replaced the old Personal Income Tax Act and related laws.

3. What are the new PAYE tax bands?

Six bands on chargeable income: 0% on the first ₦800,000, then 15%, 18%, 21% and 23% across the middle bands, with 25% applying above ₦50 million a year.

4. What is the new rent relief and how do I claim it?

A deduction of 20% of your annual rent, capped at ₦500,000, off your taxable income. Declare your rent to payroll/HR with your tenancy agreement and receipts — it isn’t applied automatically.

5. What happened to CRA (Consolidated Relief Allowance)?

It was abolished. The NTA replaces it with specific deductible reliefs — pension, NHF, NHIS, life insurance, owner-occupier mortgage interest and rent relief.

6. Did my tax go up or down?

For most low and middle earners, down — the ₦800k zero band and recalibrated rates lower effective tax for the ₦1m–₦20m range, especially with rent relief claimed. The 25% top rate touches only income above ₦50 million.

7. I work remotely for a foreign company and I’m paid in dollars — am I taxed?

Yes. Nigerian residents are taxed on worldwide income under the new framework: register with the Nigeria Revenue Service, self-declare and pay on your global earnings, even if paid offshore.

8. Are NYSC corps members taxed on the ₦77,000 allowance?

₦77,000/month is ₦924,000/year gross — but after deductions, many corps members’ chargeable income falls at or under the ₦800,000 zero band, meaning little or no PAYE. Individual outcomes depend on total income; check your specific figures.

9. What about small business owners?

Companies with turnover under ₦50 million (and fixed assets under ₦250 million) are fully exempt from Companies Income Tax, CGT and the 4% Development Levy — one of the reform’s biggest wins for SMEs.

10. Where do I verify or complain if my payslip looks wrong?

Start with your payroll/HR with a specific computation; escalate to a qualified tax professional or the Nigeria Revenue Service. The authoritative source is the Act itself and NRS guidance — not social media tax tables.

The Bottom Line

The Nigeria Tax Act is that rare reform where the average worker’s headline is positive: a genuine ₦800,000 tax-free floor, gentler middle bands, and a rent relief worth real money — paid for by tighter rules at the top, on perks, and on previously invisible foreign income. But none of it lands automatically. The zero band only helps if your payroll table was updated; the rent relief only exists if you declare it; the freelancer rules only stay painless if you register before the system finds you.

So run the five payslip checks, document your rent, push your reliefs through HR, and put your exact numbers through the PAYE calculator. In a reform built around chargeable income, the workers who understand their deductions are — quite literally — the ones who get paid.

Related reading on NaijaSabi:

• Best PFAs in Nigeria 2026 — your pension is now a bigger tax lever
• How to Buy US Stocks from Nigeria — putting your tax savings to work
• NYSC Batch B 2026 Mobilization — the ₦77,000 allowance and the zero band

Sources & References

1. Sterling Bank — “Five Things You Should Know About The New Nigerian Tax Rules In 2026.” Available at: sterling.ng
2. Cowrywise — “How the New Tax Laws Could Affect Your Salary, Savings, and Investments in 2026.” Available at: cowrywise.com

Editorial standards. This article is independently researched and compiled from the Nigeria Tax Act 2025 as analysed by major tax and payroll firms, bank explainers and current financial reporting. It is general information, not tax advice: band applications, reliefs and individual outcomes depend on personal circumstances and documentation — confirm specifics with your payroll/HR, a qualified tax professional, or the Nigeria Revenue Service before acting. If you spot an error or have a correction, please write to editorial@naijasabi.com.ng.

Last reviewed and updated: 21 July 2026 · NaijaSabi Finance Desk · Next scheduled review: quarterly through the first implementation year.