How PAYE is calculated under NTA 2026
PAYE under the Nigeria Tax Act 2026 follows one path: gross pay → statutory reliefs (pension, NHF where opted in, rent relief) → annual chargeable income → progressive NTA bands → annual PAYE ÷ 12 → other deductions → net pay. Four steps, in order:
Step 1 — Determine gross annual income
Sum basic salary, housing, transport, and other taxable allowances. If you think in monthly figures, annualize them: multiply by twelve.
Step 2 — Subtract statutory reliefs
Deduct the employee pension contribution (8% of basic + housing + transport), NHF (2.5% of basic, where the employee has opted in), and rent relief — the lower of 20% of annual rent or ₦500,000. The Consolidated Relief Allowance (CRA) is abolished; rent relief replaces it and requires documentation. What remains is annual chargeable income.
Step 3 — Apply the progressive bands
Tax each slice of chargeable income at its band rate, using the table below. The first ₦800,000 is taxed at 0% — an employee whose chargeable income falls entirely inside the zero band pays no PAYE at all.
Step 4 — Divide by 12 for the monthly deduction
PAYE in Nigeria is an annual tax paid monthly. The law defines bands on annual chargeable income, so the correct method is to annualize, tax the full year, then divide by twelve. Tools that apply a flat monthly rate drift at every band boundary — a few naira per employee per month that compounds into a filing discrepancy by year end. KoboHR computes the annual figure first, every time, which is what "correct to the kobo" means in practice.
NTA 2026 PAYE bands
| Annual chargeable income | Rate | Monthly equivalent | Note |
|---|
| First ₦800,000 | 0% | First ₦66,666.67 | Zero band — no PAYE |
| Next ₦2,200,000 (to ₦3,000,000) | 15% | To ₦250,000.00 | |
| Next ₦9,000,000 (to ₦12,000,000) | 18% | To ₦1,000,000.00 | |
| Next ₦13,000,000 (to ₦25,000,000) | 21% | To ₦2,083,333.33 | |
| Next ₦25,000,000 (to ₦50,000,000) | 23% | To ₦4,166,666.67 | |
| Above ₦50,000,000 | 25% | Above ₦4,166,666.67 | Top marginal rate |
The old minimum tax (1% of gross) is abolished, and employees earning the national minimum wage or below are exempt from PAYE.
Worked example
Take a gross salary of ₦650,000.00 per month — ₦7,800,000.00 a year — where basic + housing + transport is ₦520,000.00 per month and the employee pays ₦2,000,000.00 annual rent, documented, with no NHF opt-in.
- Pension: 8% × ₦6,240,000.00 (annual BHT) = ₦499,200.00 a year (₦41,600.00 a month).
- Rent relief: the lower of 20% × ₦2,000,000.00 = ₦400,000.00 or the ₦500,000 cap → ₦400,000.00.
- Reliefs total ₦899,200.00, so chargeable income is ₦7,800,000.00 − ₦899,200.00 = ₦6,900,800.00.
- Banding: ₦800,000.00 at 0% = ₦0.00; ₦2,200,000.00 at 15% = ₦330,000.00; the remaining ₦3,900,800.00 at 18% = ₦702,144.00.
- Annual PAYE: ₦1,032,144.00 → monthly PAYE: ₦86,012.00.
- Net pay: ₦650,000.00 − ₦41,600.00 pension − ₦86,012.00 PAYE = ₦522,388.00 a month.
This is the same arithmetic on the payslip on our homepage — line for line.
From this calculator to real payroll
For the rules behind these numbers, read the Nigeria Tax Act 2026 changes in detail and every statutory deduction in Nigerian payroll.
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PAYE calculator FAQs
Is the first ₦800,000 really tax-free?
Yes. Under the Nigeria Tax Act 2026 the first ₦800,000 of annual chargeable income is taxed at 0%, so an employee whose chargeable income falls entirely inside that band pays no PAYE. Separately, employees earning the national minimum wage or below are exempt from PAYE altogether.
How does rent relief work?
Rent relief is the lower of 20% of your annual rent or ₦500,000, deducted before your income is banded. It replaced the Consolidated Relief Allowance and requires verifiable documentation — a tenancy agreement or rent receipts — lodged with your employer.
Is NHF still deducted?
For private-sector employees, NHF is voluntary. Where an employee opts in, the deduction is 2.5% of basic salary and it is tax-deductible; where they have not opted in, no NHF should be deducted.
Why is my monthly PAYE not simply my monthly salary × a rate?
Because PAYE is an annual tax paid monthly: the law defines the bands on annual chargeable income, so the correct method is to annualize, tax the full year, and divide by twelve. A flat monthly rate gives a different — wrong — answer at every band boundary.