How to Calculate PAYE Tax in Nigeria (2025 Guide)

28 November 2025

Understanding your salary slip in Nigeria can be confusing. Between Gross Income, Net Salary, PAYE, and Pension, it's easy to get lost.

This guide breaks down exactly how your tax is calculated using the latest Personal Income Tax Act (PITA) amendments.

1. What is PAYE?

PAYE (Pay As You Earn) is the tax deducted directly from your salary by your employer and remitted to the State Board of Internal Revenue (e.g., LIRS in Lagos).

2. Key Deductions Before Tax

Before tax is calculated, certain amounts are exempt. These are called Reliefs.

Consolidated Relief Allowance (CRA)

This is the biggest tax saver. Every employee is entitled to a relief of:

Higher of ₦200,000 or 1% of Gross Income
PLUS 20% of Gross Income

Pension Contribution

8% of your Basic + Housing + Transport is deducted for your Retirement Savings Account (RSA).
This amount is tax-exempt.

National Housing Fund (NHF)

2.5% of Basic Salary (Optional/Sector specific).
Also tax-exempt.

3. Taxable Income Formula

$$ \text{Taxable Income} = \text{Gross Income} - \text{CRA} - \text{Pension} - \text{NHF} $$

4. Nigeria Tax Brackets (2025)

Once you have your Taxable Income, tax is applied progressively based on the following bands:

Taxable Income Band	Rate
First ₦300,000	7%
Next ₦300,000	11%
Next ₦500,000	15%
Next ₦500,000	19%
Next ₦1,600,000	21%
Above ₦3,200,000	24%

5. Example Calculation

Salary: ₦300,000 per month (₦3,600,000 per year).

Gross Income: ₦3,600,000
CRA:
- Fixed: ₦200,000 (since 1% of 3.6M is only 36k)
- Variable: 20% of 3.6M = ₦720,000
- Total CRA = ₦920,000
Pension (8%): ₦288,000 (Assumed on full gross for simplicity)
Taxable Income: 3,600,000 - 920,000 - 288,000 = ₦2,392,000