Complete Guide to Nigeria Income Tax 2026 - PAYE, CRA, NTA Explained

Nigeria's income tax landscape changed fundamentally in 2026 with the enactment of the Nigeria Tax Act (NTA 2026). This landmark legislation replaced the Personal Income Tax Act (PITA) framework that had governed Nigerian payroll taxes for decades. If you are an employee, employer, or HR professional trying to understand what these changes mean in practice, this guide covers everything - from the new tax bands and the abolition of the Consolidated Relief Allowance (CRA) to pension rules, the National Housing Fund, and tax filing deadlines.

Use the AfroTools Nigeria PAYE Calculator to instantly compute your take-home pay under the new NTA 2026 rules without doing any manual arithmetic.

PITA vs NTA 2026: What Changed?

The Personal Income Tax Act (PITA), as amended through 2011 and later, was the primary legislation governing individual income tax in Nigeria for over a decade. The Nigeria Tax Act 2026 (NTA) is a comprehensive reform that consolidates several tax laws, introduces new reliefs, and restructures the rate schedule to be more progressive.

The key structural changes affecting PAYE employees are:

For most low- and middle-income earners, the NTA 2026 is more favorable than PITA because the ₦800,000 zero-rate band provides direct relief that is simpler and often more generous than the old CRA calculation. High-income earners may see marginally higher tax at the top end due to the 25% rate replacing the 24% ceiling.

What Are the New NTA 2026 Tax Bands?

The NTA 2026 restructures the progressive income tax schedule. After all allowable deductions (pension, NHF, and applicable reliefs), the remaining taxable income is taxed according to the following bands:

The 0% band on the first ₦800,000 of taxable income is the single most significant change for ordinary workers. An employee with a gross annual salary of ₦3,000,000 who previously had a modest taxable income after CRA may now have a very different (and often lower) effective tax rate depending on their salary structure and available reliefs. Use the PAYE Calculator to model your specific situation.

One important nuance: because the old CRA was calculated as a percentage of gross income, very high earners benefited substantially from the CRA. Under NTA 2026, the fixed ₦800,000 zero-rate band is less proportionally valuable to six-figure earners, but the simplified structure makes compliance much easier for employers.

Why Was CRA Abolished and What Is the New Rent Relief?

The Consolidated Relief Allowance was for many years the cornerstone of Nigeria's personal income tax structure. Under PITA, it was calculated as 20% of gross income plus the higher of ₦200,000 or 1% of gross income. This meant the CRA scaled upward with salary - a significant benefit for those on higher incomes.

The NTA 2026 removes the CRA entirely and replaces it with a more targeted system:

• Rent Relief: Employees who pay rent may deduct up to ₦200,000 per year from their taxable income. This relief must be claimed with evidence of rental payments (e.g., a tenancy agreement and payment receipts). It is not automatically applied by employers - employees must notify their HR or finance departments.
• Zero-Rate Band: The first ₦800,000 of taxable income is automatically taxed at 0%, providing universal relief without requiring any paperwork from employees.

For employees who do not pay rent (homeowners, those living in employer-provided housing), the rent relief is unavailable, but the ₦800,000 zero-rate band still applies. Employers must adjust their payroll systems to reflect these changes - failure to do so may result in either over- or under-deduction of PAYE, both of which carry consequences under the NTA.

What Are the Pension Contribution Rules?

The Pension Reform Act 2014 (PRA 2014) governs mandatory pension contributions and was not repealed by the NTA 2026. The rules remain as follows:

• Employee contribution: Minimum 8% of the sum of basic salary + housing allowance + transport allowance (the "pensionable emoluments").
• Employer contribution: Minimum 10% of the same pensionable emoluments base.
• Applicability: Mandatory for organizations with 3 or more employees in the private sector. Public sector employees are covered under the Contributory Pension Scheme (CPS) administered through the Pension Transitional Arrangement Directorate (PTAD) for transitional arrangements.
• Tax treatment: Employee pension contributions are deductible from gross income before PAYE is calculated. The NTA 2026 maintains this deductibility, meaning your 8% contribution directly reduces your taxable income.
• Voluntary contributions: Additional voluntary pension contributions (up to 1/3 of annual total pension contribution) may also be tax-deductible.

A practical example: if your monthly gross salary is ₦600,000, comprising ₦300,000 basic, ₦150,000 housing, and ₦150,000 transport (among other allowances), your pensionable emoluments are ₦600,000 per month (₦300k + ₦150k + ₦150k). Your mandatory employee pension contribution is 8% × ₦600,000 = ₦48,000 per month, or ₦576,000 per year. This full amount is subtracted from gross income before the NTA 2026 tax bands are applied.

How Does the National Housing Fund (NHF) 2.5% Work?

The National Housing Fund contribution of 2.5% of basic salary is established under the National Housing Fund Act 1992 and remains unchanged under the NTA 2026. Key facts:

• Rate: 2.5% of basic salary only (not total gross)
• Applicability: All Nigerian workers in both public and private sectors earning above the national minimum wage (currently ₦70,000 monthly)
• Administration: Collected by the Federal Mortgage Bank of Nigeria (FMBN)
• Tax treatment: NHF contributions are deductible from taxable income, reducing the base on which PAYE is computed
• Benefit: Registered contributors can access loans through the National Housing Fund at subsidized interest rates of approximately 6% per annum, significantly below commercial mortgage rates of 20-30% currently prevailing in Nigeria

Many employees do not realize that NHF contributions, while mandatory, are also a form of forced savings that can be refunded with accrued interest upon retirement, permanent disability, or death. If you change jobs, your NHF contributions follow your National Identification Number (NIN) and are transferable.

How Do FIRS and State Revenue Administration Work?

A common source of confusion is which tax authority handles your personal income tax. In Nigeria, this depends on the type of taxpayer:

• PAYE employees: Your income tax is remitted to the State Internal Revenue Service (SIRS) of the state where you are resident. If you live in Lagos, your employer remits your PAYE to the Lagos Internal Revenue Service (LIRS). If you live in Abuja (FCT), it goes to the FCT Internal Revenue Service (FCTA-IRS).
• Self-employed individuals and sole proprietors: Also assessed by their State Internal Revenue Service.
• Companies: The Federal Inland Revenue Service (FIRS) handles companies income tax (CIT) under the Companies Income Tax Act (CITA), which is a separate law from PITA/NTA.
• VAT: Administered by FIRS for all taxpayers. See the AfroTools VAT Calculator for quick VAT computations.

The NTA 2026 gives the FIRS stronger coordination powers over state revenue services, including the right to conduct joint audits and enforce standardized digital filing systems. However, day-to-day PAYE administration for employees remains at the state level.

What Are the Tax Filing Deadlines?

Understanding filing deadlines is critical to avoid penalties. Under the NTA 2026 and its implementing regulations:

Pure PAYE employees whose only income is their salary - and whose employer fully deducts and remits PAYE - are generally not required to file a personal income tax return. However, if you have any additional income (rental income, freelance earnings, investment income, or foreign-source income), you are required to file Form A by March 31 each year. For import-related activities and the tax treatment of goods brought into Nigeria, see the Import Duty Calculator.

What Are Employer Obligations Under NTA 2026?

Employers bear significant responsibility for the correct administration of PAYE. The NTA 2026 reinforces and in some cases expands these obligations:

Registration

Every employer must be registered with the relevant State Internal Revenue Service and obtain a Tax Identification Number (TIN) for the organization. New employees must also have their TINs obtained (linked to their NIN) before they can be added to the payroll system.

Monthly Deduction and Remittance

PAYE must be deducted from employee salaries each month and remitted to the relevant SIRS by the 10th day of the following month. Failure to remit carries a penalty of 10% of the unremitted amount per annum plus interest at the Central Bank of Nigeria's monetary policy rate. Critically, the employer is personally liable for the tax even if they failed to deduct it from the employee's salary - they cannot recover this from the employee retroactively without the employee's consent.

Payslip Requirements

Employers are required to provide employees with detailed payslips showing gross pay, each deduction itemized (PAYE, pension, NHF), and net pay. The NTA 2026 makes digital payslips acceptable as long as they are verifiable and accessible to the employee.

Annual Returns

By January 31 each year, employers must file Form H1 with the SIRS showing the total PAYE remitted for each employee during the prior year. This document is what the SIRS uses to issue Tax Clearance Certificates to employees. Delays or inaccuracies in filing H1 directly affect your employees' ability to obtain their TCC - which is required for many government contracts, international travel documentation, and property registrations.

Digital Filing Mandate

The NTA 2026 accelerates the move toward digital tax administration. Employers with annual payroll above a specified threshold are required to file all PAYE returns electronically through the FIRS TaxPro platform or equivalent state portals. Paper returns are being phased out for medium and large employers. This change aims to reduce the scope for errors and corruption in the PAYE system.

Employee Notifications

When an employee leaves (resignation, termination, or retirement), employers must notify the relevant SIRS and the Pension Fund Administrator within 30 days. The employer must also file a final PAYE remittance covering the employee's last month of employment. Failure to do so can result in the former employee being unable to access their pension savings or obtain a Tax Clearance Certificate.

For Nigerians considering opportunities abroad, understanding your full tax position - including potential obligations on foreign income - is essential. The Japa Cost Calculator helps you model the financial impact of relocating, including tax considerations.

Frequently Asked Questions

What replaced the Consolidated Relief Allowance (CRA) under the NTA 2026?

The NTA 2026 abolished the CRA and replaced it with a 0% tax rate on the first ₦800,000 of annual taxable income (the zero-rate band), plus a Rent Relief of up to ₦200,000 per year for taxpayers who pay rent. This simpler system provides automatic relief without requiring complex CRA calculations.

What are the new NTA 2026 tax bands for Nigeria?

The NTA 2026 tax bands are: 0% on the first ₦800,000; 15% on the next income band; 18% on the following band; 21% on the next; 23% on the subsequent band; and 25% on income above the highest threshold. These replace the old PITA bands of 7%-24% and generally favor low- and middle-income earners. Use the PAYE Calculator to compute your exact tax under the new bands.

Is pension contribution still mandatory under NTA 2026?

Yes. Pension contributions under the Pension Reform Act 2014 remain mandatory and unchanged. Employees contribute a minimum of 8% of their pensionable emoluments (basic + housing + transport allowances), while employers contribute a minimum of 10%. Both contributions are tax-deductible.

Who administers income tax in Nigeria - FIRS or the state revenue services?

PAYE for employees is administered by State Internal Revenue Services (SIRS) based on where the employee is resident - not where they work. The Lagos Internal Revenue Service (LIRS) handles Lagos residents, the FCT-IRS handles Abuja residents, and so on. FIRS handles corporate income tax and VAT, but not individual PAYE.

When is the deadline for filing Nigeria personal income tax returns?

The annual personal income tax return (Form A) is due by March 31 of the year following the tax year. Pure PAYE employees with no other income source are generally not required to file. Employers must file monthly PAYE remittances by the 10th of each following month and annual employer returns (Form H1) by January 31 each year.