New PAYE Tax Bands Under NTA 2025: Full Breakdown With Examples

The complete breakdown of Nigeria’s new PAYE tax bands under the NTA 2025. Six bands from 0% to 25%, worked examples at five salary levels, and old vs new comparison.

The PAYE tax bands under the NTA 2025 changed fundamentally on 1 January 2026 — and if you are still looking at the old 7%-to-24% table from PITA, your tax calculations are wrong. The Nigeria Tax Act 2025 replaced six old bands with six new ones, introduced a 0% rate on the first ₦800,000 of chargeable income, and pushed the top rate to 25% for earners above ₦50,000,000.

This article lays out the exact bands, compares them side-by-side with the old rates, and works through five salary-level examples so you can see precisely what the change means for your take-home pay.

The Six New PAYE Tax Bands

Here are the progressive tax bands that apply to your annual chargeable income from January 2026, as published in the Fourth Schedule of the Nigeria Tax Act 2025:

The rates are progressive, not flat. This means each band applies only to the income within that slice, not to your entire income. If your chargeable income is ₦5,000,000, you do not pay 18% on the full amount. You pay 0% on the first ₦800,000, then 15% on the next ₦2,200,000, then 18% on the remaining ₦2,000,000. The total tax is always less than the top marginal rate would suggest.

The Old PITA Bands: What They Replaced

For comparison, here are the old bands under the Personal Income Tax Act that applied up to 31 December 2025:

Two differences stand out immediately. First, the old system had no 0% band — the very first naira of taxable income was taxed at 7%. Second, the old top rate of 24% kicked in at ₦3,200,000, while the new top rate of 25% starts only at ₦50,000,000. The new structure is wider, with much more room in the lower and middle bands.

The old system also used the Consolidated Relief Allowance (CRA) — 20% of gross income plus ₦200,000 — to reduce taxable income before the bands were applied. The NTA 2025 scraps CRA and replaces it with specific deductions (pension, rent relief, NHF, NHIS, life insurance). This affects the comparison at every salary level, as we will see in the examples below.

How “Chargeable Income” Is Calculated

The tax bands do not apply to your gross salary. They apply to your chargeable income — what remains after subtracting all eligible deductions. Under the NTA 2025, the main deductions available to employees are:

• Pension contribution: 8% of pensionable emoluments (Basic + Housing + Transport only)
• Rent relief: 20% of annual rent paid, capped at ₦500,000
• NHF: 2.5% of basic salary (where applicable)
• NHIS: Employee contribution under the National Health Insurance Scheme (where applicable)
• Life insurance premiums: Actual premium paid to a registered Nigerian insurer
• Mortgage interest: Interest on owner-occupied property loans

Formula: Chargeable Income = Gross Annual Income − Pension − Rent Relief − NHF − NHIS − Other Eligible Deductions

Once you have your chargeable income, you apply the six bands in order to calculate your annual PAYE. Divide by 12 for your monthly PAYE deduction.

Use our PAYE Calculator to run these numbers instantly for your specific salary.

Worked Example 1: ₦1,200,000 Gross (₦100,000/month)

This represents an entry-level employee or NYSC corps member. Salary: Basic 60% (₦720,000), Housing 20% (₦240,000), Transport 20% (₦240,000). Annual rent: ₦600,000.

Deductions:

• Pension (8% of ₦1,200,000): ₦96,000
• Rent relief (20% of ₦600,000): ₦120,000

Chargeable income: ₦1,200,000 − ₦96,000 − ₦120,000 = ₦984,000

PAYE calculation:

• ₦800,000 × 0% = ₦0
• ₦184,000 × 15% = ₦27,600

Annual PAYE: ₦27,600 | Monthly PAYE: ₦2,300

Under the old PITA system with CRA, this employee would have paid approximately ₦0 to ₦15,000 in PAYE depending on exact CRA computation. The new system produces a similar or slightly higher result for this income level because the CRA deduction (₦440,000) was more generous than the combined pension plus rent relief (₦216,000). However, if this employee’s rent were lower or zero, the old CRA would have provided more relief.

If the employee had no rent at all, chargeable income rises to ₦1,104,000, and PAYE becomes ₦45,600 annually (₦3,800/month). The rent documentation matters.

Worked Example 2: ₦3,600,000 Gross (₦300,000/month)

A mid-level professional. Basic 60% (₦2,160,000), Housing 20% (₦720,000), Transport 20% (₦720,000). Annual rent: ₦1,200,000.

Deductions:

• Pension (8% of ₦3,600,000): ₦288,000
• Rent relief (20% of ₦1,200,000): ₦240,000
• NHF (2.5% of ₦2,160,000): ₦54,000

Chargeable income: ₦3,600,000 − ₦288,000 − ₦240,000 − ₦54,000 = ₦3,018,000

PAYE calculation:

• ₦800,000 × 0% = ₦0
• ₦2,200,000 × 15% = ₦330,000
• ₦18,000 × 18% = ₦3,240

Annual PAYE: ₦333,240 | Monthly PAYE: ₦27,770

Under old PITA: CRA = ₦920,000. Pension = ₦288,000. Taxable = ₦2,392,000. Tax = ₦21,000 + ₦33,000 + ₦75,000 + ₦95,000 + ₦166,320 = ₦390,320.

Annual saving under NTA 2025: ₦57,080 (₦4,757 more per month).

Worked Example 3: ₦7,200,000 Gross (₦600,000/month)

A senior professional. Basic 50% (₦3,600,000), Housing 25% (₦1,800,000), Transport 15% (₦1,080,000), Others 10% (₦720,000). Annual rent: ₦2,400,000.

Deductions:

• Pension (8% of ₦6,480,000): ₦518,400
• Rent relief (20% of ₦2,400,000 = ₦480,000): ₦480,000
• NHF (2.5% of ₦3,600,000): ₦90,000

Chargeable income: ₦7,200,000 − ₦518,400 − ₦480,000 − ₦90,000 = ₦6,111,600

PAYE calculation:

• ₦800,000 × 0% = ₦0
• ₦2,200,000 × 15% = ₦330,000
• ₦3,111,600 × 18% = ₦560,088

Annual PAYE: ₦890,088 | Monthly PAYE: ₦74,174

Under old PITA: CRA = ₦1,640,000. Pension = ₦518,400. Taxable = ₦5,041,600. Tax = ₦21,000 + ₦33,000 + ₦75,000 + ₦95,000 + ₦336,000 + ₦441,984 = ₦1,001,984.

Annual saving under NTA 2025: ₦111,896 (₦9,325 more per month).

Worked Example 4: ₦18,000,000 Gross (₦1,500,000/month)

A senior manager or director. Basic 50% (₦9,000,000), Housing 25% (₦4,500,000), Transport 15% (₦2,700,000), Others 10% (₦1,800,000). Annual rent: ₦3,500,000.

Deductions:

• Pension (8% of ₦16,200,000): ₦1,296,000
• Rent relief (20% of ₦3,500,000 = ₦700,000 → capped at ₦500,000): ₦500,000
• NHF (2.5% of ₦9,000,000): ₦225,000

Chargeable income: ₦18,000,000 − ₦1,296,000 − ₦500,000 − ₦225,000 = ₦15,979,000

PAYE calculation:

• ₦800,000 × 0% = ₦0
• ₦2,200,000 × 15% = ₦330,000
• ₦9,000,000 × 18% = ₦1,620,000
• ₦3,979,000 × 21% = ₦835,590

Annual PAYE: ₦2,785,590 | Monthly PAYE: ₦232,133

Under old PITA: CRA = ₦3,800,000. Pension = ₦1,296,000. Taxable = ₦12,904,000. Tax = ₦21,000 + ₦33,000 + ₦75,000 + ₦95,000 + ₦336,000 + ₦2,328,960 = ₦2,888,960.

Annual saving under NTA 2025: ₦103,370 (₦8,614 more per month). Even at this income level, the new system produces a lower PAYE bill — though the margin is narrower because the lost CRA is large (₦3,800,000 vs ₦500,000 rent relief cap).

Worked Example 5: ₦60,000,000 Gross (₦5,000,000/month)

A C-suite executive. At this level, all five taxable bands and the new 25% top rate come into play. Basic 40% (₦24,000,000), Housing 20% (₦12,000,000), Transport 10% (₦6,000,000), Others 30% (₦18,000,000). Annual rent: ₦6,000,000.

Deductions:

• Pension (8% of ₦42,000,000): ₦3,360,000
• Rent relief: ₦500,000 (cap reached)
• NHF (2.5% of ₦24,000,000): ₦600,000

Chargeable income: ₦60,000,000 − ₦3,360,000 − ₦500,000 − ₦600,000 = ₦55,540,000

PAYE calculation:

Annual PAYE: ₦11,815,000 | Monthly PAYE: ₦984,583

The effective tax rate is approximately 19.7% of gross income. Under the old PITA system, CRA would have been ₦12,200,000 — a massive deduction that significantly reduced taxable income. With the CRA gone and only ₦500,000 in rent relief, high earners see a thinner cushion. The old PITA effective rate for this income level was roughly 17-18%. The new system produces a marginally higher tax bill for earners at the very top — one of the few groups that pays more under the NTA 2025.

Summary: Who Wins and Who Loses

The pattern is clear: employees earning between roughly ₦2,000,000 and ₦25,000,000 in annual gross income benefit the most. The ₦800,000 tax-free band creates savings that outweigh the loss of CRA for this group. Very low earners may see a slight increase if they cannot document rent (since CRA was automatic and rent relief is not). Very high earners above ₦50,000,000 face a higher bill due to the 25% top rate and the ₦500,000 cap on rent relief replacing a much larger CRA.

How the ₦800,000 Tax-Free Band Works in Practice

The 0% band is the single most impactful change. Every taxpayer benefits from it, but the relative benefit is largest for lower earners. Here is the maths: having ₦800,000 taxed at 0% instead of 15% (the next band’s rate) saves every taxpayer ₦120,000 in annual PAYE. That ₦120,000 is baked into every calculation above.

For employees on the national minimum wage (₦70,000/month or ₦840,000/year), the tax-free band — combined with even modest pension and NHF deductions — pushes their chargeable income below ₦800,000. They pay zero PAYE. This effectively exempts minimum wage earners from income tax entirely.

NYSC corps members, whose monthly allowance is ₦33,000 (₦396,000/year), are also fully exempt. Their annual income is well within the 0% band even before deductions.

Key Points to Remember

• The bands apply to chargeable income, not gross salary. Always subtract pension, rent relief, NHF, NHIS, and other eligible deductions first. Applying the bands to gross pay overstates your PAYE significantly.
• Rent relief requires documentation. Without a tenancy agreement, rent receipts, or bank transfer evidence, your employer must compute PAYE with no rent relief. This is the most commonly missed deduction and the one that makes the biggest difference for mid-range earners.
• Pension is calculated on Basic + Housing + Transport only. Other allowances (utilities, leave, bonuses) are excluded from the pension base. If your employer calculates pension on gross salary, the deduction is incorrect.
• The old CRA no longer applies. If your payslip still shows a Consolidated Relief Allowance, your employer’s payroll system is using outdated PITA rules. Every figure downstream will be wrong.
• Progressive means sliced, not flat. Earning ₦5,000,000 in chargeable income does not mean you pay 18% on the full amount. You pay 0% + 15% + 18% on successive slices. The effective rate is always lower than the marginal rate.

How to Check Your Own PAYE

You do not need to calculate by hand. Follow these three steps:

1. Gather your payslip. Note your gross annual salary, the salary breakdown (basic, housing, transport, other allowances), and all deductions shown.
2. Identify your deductions. Pension, rent relief (if claimed), NHF, NHIS, and any life insurance premiums. Subtract them from gross to get your chargeable income.
3. Run the numbers. Enter your figures into our free PAYE Calculator. It applies the NTA 2025 bands automatically and shows your annual and monthly PAYE, effective rate, and take-home pay.

If the calculator’s result differs from what your employer is deducting, one of you has the wrong figures. Compare the breakdown line by line and raise any discrepancy with your HR department. You can also model different salary structures using the Salary Optimizer to find the split that minimises your tax within the law.

What Employers and HR Teams Must Do

• Update your payroll software immediately if you have not already. The NTA 2025 bands must replace the old PITA bands from January 2026. Any payroll system still applying the 7%/11%/15%/19%/21%/24% structure is producing incorrect PAYE figures for every employee.
• Remove the CRA from all computations. CRA does not exist under the NTA 2025. Replace it with the specific deductions: pension, rent relief, NHF, NHIS, life insurance.
• Collect rent documentation from employees. Send a circular early in the year requesting tenancy agreements and rent receipts. Employees who do not provide documentation cannot receive rent relief — and may push back when they see higher PAYE deductions.
• Verify the pension base. Pension is 8% of Basic + Housing + Transport only. Reconfigure payroll to exclude utilities, leave, bonuses, and other allowances from the pension computation.
• Communicate the changes to staff. Employees will notice the difference in their January payslip. Explain what changed, why, and how they can claim all available reliefs. A brief internal note saves your HR team weeks of individual queries.

Final Thoughts

The new PAYE tax bands under the NTA 2025 are a genuine improvement for the majority of Nigerian employees. The ₦800,000 tax-free band delivers universal relief, the wider middle bands (15% up to ₦3,000,000, 18% up to ₦12,000,000) keep rates lower for longer, and the overall structure is simpler than the old six-band PITA table. The trade-off is the loss of CRA, which particularly affects high earners and employees who cannot document their rent.

The practical message is straightforward: know the bands, claim your deductions, and check your payslip. The difference between an employee who claims all available reliefs and one who does not can be six figures in annual PAYE. That is money that should be in your account, not overpaid to the tax authority.

Run your own numbers through our free PAYE Calculator, explore different salary structures with the Salary Optimizer, or test your understanding of the new system with our Tax Quiz. If your situation involves multiple income sources, benefits in kind, or foreign income, consult a professional from our Tax Professional Directory. For the official gazette text of the NTA 2025 and updated guidance from the tax authority, visit nrs.gov.ng.

FAQs About the New PAYE Tax Bands

What are the new PAYE tax rates from January 2026?

The NTA 2025 introduces six progressive bands: 0% on the first ₦800,000 of chargeable income, 15% on ₦800,001 to ₦3,000,000, 18% on ₦3,000,001 to ₦12,000,000, 21% on ₦12,000,001 to ₦25,000,000, 23% on ₦25,000,001 to ₦50,000,000, and 25% on everything above ₦50,000,000.

Do I pay 0% tax if I earn ₦800,000 or less?

If your annual chargeable income (after deducting pension, rent relief, NHF, and other eligible deductions) is ₦800,000 or below, you pay zero PAYE. Your gross salary can be higher than ₦800,000 and still result in zero tax if your deductions bring the chargeable figure within the 0% band.

Will I pay more or less tax under the new bands?

Most employees earning between ₦2,000,000 and ₦25,000,000 annually will pay less. The ₦800,000 tax-free band creates savings that outweigh the loss of CRA for this income range. Very high earners above ₦50,000,000 may pay slightly more due to the 25% top rate and the ₦500,000 cap on rent relief. Employees who cannot document rent payments may also see a small increase at lower income levels.

What happened to the Consolidated Relief Allowance?

CRA was abolished by the NTA 2025. It was replaced by specific, documented deductions: rent relief (20% of annual rent, max ₦500,000), pension contributions (8% of Basic + Housing + Transport), NHF, NHIS, and life insurance premiums. Unlike CRA, which was automatic, each of these deductions requires supporting documentation.

How do I calculate my chargeable income?

Start with your gross annual income. Subtract your employee pension contribution (8% of Basic + Housing + Transport), rent relief (20% of annual rent, max ₦500,000), NHF contribution (if applicable), NHIS contribution (if applicable), and any qualifying life insurance premiums. The result is your chargeable income, to which the six NTA 2025 tax bands are applied. Use our PAYE Calculator to do this automatically.

Are NYSC corps members exempt from PAYE?

Effectively, yes. The NYSC monthly allowance of ₦33,000 (₦396,000/year) falls well within the ₦800,000 tax-free band. Even without any deductions, corps members’ annual income is fully exempt from PAYE under the NTA 2025.

What if my employer is still using the old tax bands?

Raise it with your HR department immediately. Any payroll system still applying the PITA rates (7% to 24%) from January 2026 is producing incorrect PAYE calculations. You are being over- or under-taxed, and your employer is non-compliant. Use our PAYE Calculator to check what your PAYE should be, and present the correct figures to HR as a reference.