How to Calculate Your PAYE Tax in Nigeria (2026 Step-by-Step)
PAYE tax calculation does not have to be confusing. Here is exactly how it works under NTA 2026, with examples for every income level.
How to Calculate Your PAYE Tax in Nigeria (2026 Step-by-Step)
If you earn a salary in Nigeria, PAYE (Pay As You Earn) is the biggest deduction on your payslip. Most people just see the final number and accept it. But understanding how PAYE is calculated puts you in control. You can spot errors, plan better, and know if your employer is deducting too much.
This guide breaks down exactly how PAYE tax calculation works in Nigeria for 2026, using the current NTA 2026 tax bands.
What Is PAYE?
PAYE stands for Pay As You Earn. It is the system where your employer deducts income tax from your salary every month and remits it to the state internal revenue service on your behalf. You never handle the money — it goes straight from your gross salary to the tax authority.
This applies to every employee in Nigeria, whether you work for a bank, a startup, or a government agency.
The NTA 2026 Tax Bands
The Nigeria Tax Act 2026 updated the personal income tax bands. Here is the current structure:
| Annual Taxable Income | Tax Rate |
|---|---|
| First NGN 800,000 | 0% |
| Next NGN 2,200,000 | 15% |
| Next NGN 9,000,000 | 18% |
| Next NGN 13,000,000 | 21% |
| Next NGN 25,000,000 | 23% |
| Above NGN 50,000,000 | 25% |
These are progressive bands. You only pay the higher rate on the portion of income that falls within each band, not on your entire salary.
Step-by-Step PAYE Calculation
Here is how to calculate PAYE manually. Let us use a monthly salary of NGN 500,000 (NGN 6,000,000 annual) as an example.
Step 1: Calculate Your Gross Annual Salary
Monthly salary × 12 = NGN 500,000 × 12 = NGN 6,000,000
Step 2: Subtract Allowable Deductions
Before applying tax bands, subtract these from your gross:
- •Consolidated Relief Allowance (CRA): The greater of NGN 200,000 or 1% of gross income, PLUS 20% of gross income
- •Pension contribution: 8% of your basic salary
- •NHF (National Housing Fund): 2.5% of your basic salary
- •NHIS (if applicable): 1% of basic salary
For our example (assuming basic salary is 50% of gross = NGN 3,000,000):
- •CRA = NGN 200,000 + (20% × NGN 6,000,000) = NGN 1,400,000
- •Pension = 8% × NGN 3,000,000 = NGN 240,000
- •NHF = 2.5% × NGN 3,000,000 = NGN 75,000
Total deductions = NGN 1,715,000
Step 3: Calculate Taxable Income
Taxable income = Gross - Deductions = NGN 6,000,000 - NGN 1,715,000 = NGN 4,285,000
Step 4: Apply the Tax Bands
- •First NGN 800,000 at 0% = NGN 0
- •Remaining NGN 3,485,000 at 15% = NGN 522,750
Total annual PAYE = NGN 522,750 Monthly PAYE = NGN 43,562.50
Step 5: Calculate Net Salary
Net monthly salary = NGN 500,000 - NGN 43,563 (PAYE) - NGN 20,000 (pension) - NGN 6,250 (NHF) = NGN 430,187
That is your real take-home.
Why Manual Calculation Is Risky
The formula looks straightforward, but in practice there are complications:
- •Different states have slightly different tax bands
- •Basic salary ratio varies between employers
- •Bonuses and allowances are treated differently
- •The CRA calculation has edge cases
- •Pension cap at NGN 400,000 monthly contribution threshold
One mistake in any step and your PAYE is wrong. Over-deducting means less money in your pocket. Under-deducting means a surprise tax bill.
The Easy Way: Use Taxee
Taxee handles all of this automatically. Enter your gross salary, and it calculates your exact PAYE, pension, NHF, and net take-home using the latest NTA 2026 rules. Works for all 37 states.
No spreadsheets. No formulas. Just your numbers.
Critical updates only.
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