Two things about Nigerian income tax surprise people. The first is that the whole table changed on 1 January 2026. The second is who you pay.
You pay Lagos State, not the federal government
Personal income tax is a state tax. If you live in Lagos, your PAYE goes to the Lagos State Internal Revenue Service, not to the FIRS.
What decides it is residence, not where your employer’s head office is. An employee living in Lagos and working for an Abuja company is a Lagos taxpayer. Getting this wrong is how people end up with a tax clearance certificate from the wrong state, which then fails when a bank or an embassy asks for it.
The bands
The Nigeria Tax Act 2025 replaced the old graduated table and abolished the Consolidated Relief Allowance. These are annual figures, on chargeable income:
| Chargeable income | Rate |
|---|---|
| First ₦800,000 | 0% |
| Next ₦2,200,000 | 15% |
| Next ₦9,000,000 | 18% |
| Next ₦13,000,000 | 21% |
| Next ₦25,000,000 | 23% |
| Above ₦50,000,000 | 25% |
The first ₦800,000 a year — about ₦66,666.67 a month — is tax free.
The bands are marginal. Earning one naira into the 25% band taxes that naira at 25%, not your whole income. This is worth saying because a great deal of Nigerian salary negotiation is conducted on the opposite belief.
What comes off before the bands apply
Chargeable income is not your gross. Deduct first:
- Pension, 8% — but of basic, housing and transport, not of total pay
- National Housing Fund, 2.5% of basic
- Rent relief
Rent relief, and why it is worth less than it sounds
Rent relief replaced the Consolidated Relief Allowance. It is 20% of the rent you actually paid, capped at ₦500,000.
The cap is the whole story. 20% of the rent stops growing once the rent passes ₦2,500,000 a year. Above that, more rent buys no more relief.
A mid-range one-bedroom at ₦1,800,000 is already past it: the relief is ₦360,000, the cap, not 20% of the rent.
Note
You need evidence of rent actually paid. This is the strongest practical reason to insist on a receipt naming the period — see the rent advance.
If you are not on a payroll
Freelancers and business owners file direct with the LIRS rather than having tax deducted. Two things to expect:
- Withholding tax is deducted at source by your clients — 5% on professional and consultancy services. It is an advance against your bill, not an extra tax, so keep every credit note.
- Presumptive assessment, if you file nothing. The state will estimate what it thinks you earned. That estimate is not designed to be generous.
Getting the number right
Work it out in this order: gross, minus pension, minus the NHF, minus rent relief. Apply the bands to what is left. Divide by twelve for the monthly deduction.
Note
A salary calculator for the new bands is being built. Until it is published, do the arithmetic above rather than using one written for the old Consolidated Relief Allowance, which no longer exists.