The biggest PAYE rewrite in a generation
The Nigeria Tax Act 2025 took effect on 1 January 2026, replacing the Personal Income Tax (Amendment) Act 2011 brackets that had been in place — with minor tweaks — for over a decade. The January 2026 payslip was the first to reflect the new rules, and most salary earners noticed a meaningful change. For low and mid earners, the change was take-home positive. For high earners, the top brackets bite slightly harder than before.
This article walks through what changed, who gained and who paid more, and links to our free calculator so you can see your specific number.
What changed: the ₦800,000 exemption
The single biggest change is the introduction of a real ₦800,000 annual exemption. Any taxable income below this threshold is fully exempt from PAYE. This replaces the previous Consolidated Relief Allowance (CRA) system, which applied percentage rebates that produced messier marginal calculations.
The new bracket schedule is:
- ₦0 – ₦800,000: 0%
- ₦800,000 – ₦3,000,000: 15%
- ₦3,000,000 – ₦12,000,000: 18%
- ₦12,000,000 – ₦25,000,000: 21%
- ₦25,000,000 – ₦50,000,000: 23%
- Above ₦50,000,000: 25%
These are taxable income brackets — that is, the brackets apply *after* mandatory PRA pension contributions (8% of gross) and optional NHF contributions (2.5% of gross) have been deducted.
Who gained, who paid more
On low earnings — a ₦500,000 annual salary — the bill drops to zero. After the 8% PRA pension deduction, taxable income is ₦460,000, fully inside the 0% band. Take-home is ₦460,000/yr, or about ₦38,333/month. Under the old CRA system, a thin PAYE liability still applied. The Act gave low earners a clean tax-free zone.
On mid earnings — a ₦3,600,000 annual salary (₦300,000/month) — pension leaves ₦3,312,000 of taxable income. The brackets apply as: ₦0 on the first ₦800k, 15% × ₦2.2M = ₦330,000 in the second band, and 18% × ₦312,000 = ₦56,160 in the third band. Total PAYE = ₦386,160. Annual take-home: ₦2,925,840 (about ₦243,820/month). This is roughly neutral to slightly better than the old system for mid earners.
On high earnings — ₦12,000,000 annual with optional NHF — pension and NHF together remove ₦1,260,000, leaving ₦10,740,000 taxable. PAYE works out to ₦1,723,200, an effective tax rate of 14.4% on gross. The new top brackets (23% above ₦25M, 25% above ₦50M) only bite for executive-level salaries where the marginal rate increment matters most.
Run the numbers for yourself
We built three calculators that encode the new Tax Act 2025 brackets exactly, alongside loan and savings tools that cite the current CBN MPR (26.5%) and NBS inflation (15.69% YoY April 2026):
- Nigeria PAYE / take-home calculator → — gross to net with full bracket breakdown
- Nigeria loan calculator → — monthly payment, total interest, amortization
- Nigeria savings calculator → — goal mode + inflation-adjusted projection
Why this matters for budgeting
A take-home calculator is the foundation of any household budget. Without the exact number, every downstream decision — how much to save, how much loan you can afford, whether the ₦150k/month flat in Lekki is in reach — is a guess. The Tax Act 2025 changed the numbers, and a calculator built for the new rules is the cleanest way to update your plan.
Source and verification
Source: Nigeria Tax Act 2025. Brackets and pension rules verified 27 May 2026.
This article is educational only and does not constitute personalised tax advice. For complex cases (multi-state employment, expatriate status, share-based compensation) consult a Nigerian chartered tax accountant.