PAYE Tax in Nigeria: Overview (2025 Details)

Tax Percentage on Salary in Nigeria: Full Details With Complete Breakdown

Note: This article compiles information from sources like PwC Tax Summaries, Nairametrics, and the Personal Income Tax Amendment Act (PITAM) 2011, supplemented by the Finance Act 2020 and industry trends, to provide a comprehensive overview of tax percentages on salaries in Nigeria as of June 2025. All monetary figures are in Nigerian Naira (NGN), unless stated otherwise, and account for inflation (30–35% annually) and naira depreciation (₦1,600–₦1,800 per USD). Estimates are based on current tax laws and reported data.

Introduction

In Nigeria, personal income tax on salaries is administered under the Pay As You Earn (PAYE) system, where employers deduct taxes from employees’ salaries and remit them to the relevant State Internal Revenue Service (SIRS) or the Federal Inland Revenue Service (FIRS) for Federal Capital Territory (FCT) residents. The tax is governed by the Personal Income Tax Act (PITA) 1993, as amended by the PITAM 2011 and Finance Act 2020, effective January 1, 2021. PAYE applies to employees, including temporary and casual workers, based on their residency and income sources.

This article provides a detailed breakdown of tax percentages on salaries in Nigeria, covering tax rates, allowances, reliefs, deductions, calculation methods, compliance requirements, and factors affecting taxation. It includes sample calculations and comparisons with related tax systems, adjusted for 2025 economic conditions.

PAYE Tax in Nigeria: Overview

The PAYE system ensures that taxes are deducted at source from employees’ salaries, based on their taxable income. Key aspects include:

  • Taxable Income: Gross emoluments (salary, bonuses, allowances, benefits-in-kind) minus non-taxable allowances, reliefs, and statutory deductions.
  • Residency Rules: Residents (individuals in Nigeria for ≥183 days in a 12-month period) are taxed on worldwide income. Non-residents are taxed only on Nigeria-sourced income, unless exempt under double taxation treaties (DTTs).
  • Tax Authority: State Internal Revenue Service (SIRS) collects PAYE for residents in their state of residence. FIRS collects for FCT residents, military, police, foreign service officers, and non-residents with Nigeria-sourced income.
  • Legislation: Governed by PITA 1993, PITAM 2011, and Finance Act 2020.

PAYE Tax Rates and Bands

Nigeria uses a progressive tax system with rates ranging from 7% to 24%, applied to annual taxable income as per the Sixth Schedule of PITA. A minimum tax of 1% of gross income applies if taxable income is zero or PAYE tax is lower than the minimum. Below are the tax bands for 2025:

PAYE Tax Rates (Annual)

  • First ₦300,000: 7%
  • Next ₦300,000: 11% (₦300,001–₦600,000)
  • Next ₦500,000: 15% (₦600,001–₦1,100,000)
  • Next ₦500,000: 19% (₦1,100,001–₦1,600,000)
  • Next ₦1,600,000: 21% (₦1,600,001–₦3,200,000)
  • Above ₦3,200,000: 24%

Source:,,

Minimum Wage Exemption

  • Employees earning the minimum wage (₦30,000 monthly or ₦360,000 annually, per Finance Act 2020) are exempt from PAYE tax.

Allowances and Reliefs (Tax-Exempt Deductions)

To reduce taxable income, employees are entitled to reliefs and non-taxable allowances under PITA:

  1. Consolidated Relief Allowance (CRA):
    • Higher of ₦200,000 or 1% of gross income, plus 20% of gross income.
    • Example: For ₦1,000,000 annual gross income, CRA = ₦200,000 + 20% of ₦1,000,000 = ₦400,000.
    • Source:,
  2. Statutory Deductions:
    • Pension Contributions: 8% of basic salary, housing, and transport allowances (employee) + 10% (employer), or 20% if employer bears the full contribution.
    • National Housing Fund (NHF): 2.5% of basic salary for employees earning ≥₦3,000 annually (voluntary for private sector).,
    • National Health Insurance Scheme (NHIS): Contributions are tax-exempt.
    • Life Assurance Premiums: Premiums paid for life insurance or spouse’s life insurance.
    • Gratuities: Payments upon retirement or termination.
  3. Non-Taxable Allowances:
    • Reimbursements for work-related expenses (e.g., travel costs for official duties).
    • Source:

Note: Gross emoluments include salary, bonuses, allowances (e.g., housing, transport, meals), and benefits-in-kind (e.g., company car), unless specifically exempt.

PAYE Calculation Method

To calculate PAYE tax, follow these steps:

  1. Determine Gross Emolument: Sum salary, bonuses, allowances, and benefits-in-kind.
  2. Subtract Non-Taxable Deductions: Deduct pension, NHF, NHIS, life assurance premiums, and gratuities.
  3. Apply Consolidated Relief Allowance (CRA): Subtract the higher of ₦200,000 or 1% of gross income, plus 20% of gross income.
  4. Calculate Taxable Income: Gross emolument minus deductions and CRA.
  5. Apply Tax Rates: Use the progressive tax bands to compute tax on taxable income.
  6. Divide for Monthly PAYE: Divide annual tax by 12 for monthly deductions.
  7. Add Minimum Tax (if applicable): If taxable income is zero or PAYE is lower, apply 1% of gross income.

Source:,

Sample PAYE Calculations

Example 1: Monthly Salary of ₦200,000 (No Additional Deductions)

  • Annual Gross Income: ₦200,000 × 12 = ₦2,400,000
  • CRA: ₦200,000 + (20% × ₦2,400,000) = ₦200,000 + ₦480,000 = ₦680,000
  • Taxable Income: ₦2,400,000 − ₦680,000 = ₦1,720,000
  • Tax Calculation:
    • First ₦300,000 at 7% = ₦21,000
    • Next ₦300,000 at 11% = ₦33,000
    • Next ₦500,000 at 15% = ₦75,000
    • Next ₦500,000 at 19% = ₦95,000
    • Remaining ₦120,000 (₦1,720,000 − ₦1,600,000) at 21% = ₦25,200
  • Total Annual Tax: ₦21,000 + ₦33,000 + ₦75,000 + ₦95,000 + ₦25,200 = ₦249,200
  • Monthly PAYE: ₦249,200 ÷ 12 = ₦20,766.67
  • Net Monthly Salary: ₦200,000 − ₦20,766.67 = ₦179,233.33

Example 2: Monthly Salary of ₦1,000,000 (With Pension and NHF)

  • Annual Gross Income: ₦1,000,000 × 12 = ₦12,000,000
  • Deductions:
    • Pension (8% of basic, housing, transport; assume 50% of salary = ₦500,000): ₦500,000 × 8% × 12 = ₦480,000
    • NHF (2.5% of basic; assume ₦300,000): ₦300,000 × 2.5% × 12 = ₦90,000
  • Total Deductions: ₦480,000 + ₦90,000 = ₦570,000
  • Income After Deductions: ₦12,000,000 − ₦570,000 = ₦11,430,000
  • CRA: ₦200,000 + (20% × ₦12,000,000) = ₦200,000 + ₦2,400,000 = ₦2,600,000
  • Taxable Income: ₦11,430,000 − ₦2,600,000 = ₦8,830,000
  • Tax Calculation:
    • First ₦300,000 at 7% = ₦21,000
    • Next ₦300,000 at 11% = ₦33,000
    • Next ₦500,000 at 15% = ₦75,000
    • Next ₦500,000 at 19% = ₦95,000
    • Next ₦1,600,000 at 21% = ₦336,000
    • Remaining ₦5,630,000 (₦8,830,000 − ₦3,200,000) at 24% = ₦1,351,200
  • Total Annual Tax: ₦21,000 + ₦33,000 + ₦75,000 + ₦95,000 + ₦336,000 + ₦1,351,200 = ₦1,911,200
  • Monthly PAYE: ₦1,911,200 ÷ 12 = ₦159,266.67
  • Net Monthly Salary: ₦1,000,000 − ₦159,266.67 − ₦40,000 (pension) − ₦7,500 (NHF) = ₦793,233.33

Source:,

Additional Statutory Deductions

Beyond PAYE, employees may face other deductions:

  • Pension: 8% employee + 10% employer (or 20% employer-only) of basic, housing, and transport allowances. Mandatory for employers with ≥15 employees.,
  • National Housing Fund (NHF): 2.5% of basic salary, voluntary for private sector.
  • National Health Insurance Scheme (NHIS): Varies, typically 5% of basic salary (employee) + 10% (employer).
  • Employee Compensation Scheme (NSITF): 1% of gross salary, employer-paid.

These deductions reduce net salary but are often tax-exempt, lowering PAYE liability.

Compliance and Filing Requirements

  • Monthly PAYE Remittance: Employers deduct PAYE and remit to SIRS/FIRS by the 10th of the following month.,
  • Annual Returns:
    • Form H1 (Employer’s Return): Details employees’ income and taxes, due January 31.
    • Form A (Individual Return): Declares income and claims reliefs, due March 31.
    • Form G: Shows monthly remittances, due January 31.
  • Penalties:
    • Non-payment: 10% of unpaid tax per annum + interest at bank lending rate (15–21% one-off).,
    • Late filing: ₦50,000 (individuals), ₦500,000 (corporates).

Source:,

Factors Influencing PAYE Tax

  1. Income Level: Higher earners face higher tax rates (up to 24%).
  2. Residency: Residents pay on worldwide income; non-residents on Nigeria-sourced income only.
  3. Allowances and Reliefs: CRA, pension, and NHF reduce taxable income.
  4. Employer Type: Private sector may offer more benefits, reducing taxable income.
  5. Economic Conditions: Inflation (30–35%) and naira depreciation (₦1,600–₦1,800 per USD) affect real income but not tax rates.
  6. State Variations: Some states (e.g., Lagos) have efficient tax systems, ensuring compliance.

Comparison With Other Taxes

  • Withholding Tax (WHT): 10% on dividends, interest, and certain services (e.g., consultancy for non-residents). Serves as final tax for some non-residents.,
  • Direct Assessment: Applies to self-employed individuals, taxed similarly but filed directly.
  • Corporate Income Tax (CIT): 30% for companies with turnover >₦100 million, not applicable to salaries.
  • Value Added Tax (VAT): 7.5% on goods/services, not directly applied to salaries but affects cost of living.

PAYE tax rates (7–24%) are lower than CIT but progressive, impacting higher earners more.

Challenges and Considerations

  1. Economic Impact: Inflation (30–35%) erodes net income, despite static tax rates.
  2. Compliance Burden: Employers must file accurate returns to avoid penalties.
  3. Low-Income Exemption: Minimum wage earners (₦30,000/month) are exempt, but many earn slightly above, facing tax.
  4. Non-Remittance: Some employers fail to remit deducted taxes, requiring employees to verify via SIRS (e.g., OGIRS).
  5. Expatriate Taxation: Non-residents may avoid tax under DTTs if conditions are met (e.g., <183 days in Nigeria).

Proposed Tax Reforms (2024 Tax Bill)

Posts on X indicate potential reforms by the Presidential Committee on Fiscal Policy and Tax Reforms, suggesting:

  • A 25% tax rate for those earning ₦100 million monthly.
  • Tax exemption for 30% of Nigerians earning ₦50,000–₦70,000 monthly.
    These reforms are not yet law as of June 2025 and require verification.,

Conclusion

In Nigeria, PAYE tax on salaries ranges from 7% to 24%, applied progressively to taxable income after deductions like CRA (₦200,000 + 20% of gross income), pension (8–20%), and NHF (2.5%). Employees earning ≤₦30,000 monthly are exempt, while higher earners face significant deductions. Compliance involves monthly remittances by the 10th of the following month and annual returns (Form H1, Form A) by January 31 and March 31, respectively. Economic challenges like inflation and naira depreciation reduce net income, but reliefs help mitigate tax burdens. Employees should verify remittances with SIRS and use tools like smepayroll.com.ng for accurate calculations. As Nigeria’s tax system evolves, staying informed ensures compliance and financial planning.

For precise calculations, use PAYE calculators (e.g., smepayroll.com.ng, ng.talent.com) or consult your employer’s HR or SIRS.,

Sources

  • PwC Tax Summaries: Nigeria – Individual Taxes, 2025.
  • Nairametrics: How to Calculate PAYE Tax, 2019.
  • Taxpal Africa: PAYE Calculation in Nigeria, 2024.
  • Ogun State Revenue Service: FAQs on Personal Income Tax, 2025.
  • SME Payroll: Nigeria PAYE Calculator, 2024.
  • X Posts: Tax rates and proposed reforms, 2024–2025.,,,

Disclaimer: Tax calculations are based on current laws and estimates. Actual taxes may vary based on individual circumstances. Consult SIRS, FIRS, or a tax professional for accurate assessments.

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