Nigeria Tax Act 2026: Everything That Changed for Employees

The Nigeria Tax Act (NTA) represents the most significant overhaul of personal income taxation in Nigeria in over two decades. Signed into law in late 2025, it replaces the Personal Income Tax Act (PITA) and fundamentally changes how PAYE is calculated for every salaried worker in Nigeria.

This guide explains every change that affects employees — from the abolished CRA to the new tax bands, rent relief, pension rules, and the brand-new Development Levy. Whether you earn minimum wage or ₦50 million per year, this article tells you exactly what changed and how it hits your payslip.

Overview: What is the NTA?

The Nigeria Tax Act 2026 is a comprehensive tax reform law that consolidates and modernises Nigeria's tax framework. For employees, the key changes are:

• The Consolidated Relief Allowance (CRA) is abolished entirely
• A new ₦800,000 tax-free threshold replaces the CRA
• A rent relief of up to ₦200,000/year is introduced
• Tax bands are restructured with new income thresholds
• A flat ₦4,000 Development Levy applies to all taxpayers
• NHIS contributions are no longer tax-deductible
• Pension and NHF remain tax-deductible

The legislation was driven by the Federal Government's push to broaden the tax base while providing relief to low-income earners. The ₦800K threshold ensures that workers at or near the minimum wage pay little to no income tax. You can see the impact on your own salary using our Nigeria PAYE Calculator.

CRA Abolished — What Replaces It

How CRA Worked Under PITA

Under the old PITA system, every employee received a Consolidated Relief Allowance calculated as:

• ₦200,000 flat relief, PLUS
• 20% of gross income

For a ₦5M earner, this meant a CRA of ₦200,000 + ₦1,000,000 = ₦1,200,000 deducted before taxable income was calculated. The higher your salary, the larger the CRA — making it very generous for high earners.

The NTA Replacement: ₦800K Threshold + Rent Relief

The NTA replaces the CRA with two mechanisms:

1. ₦800,000 zero-rate band: The first ₦800K of taxable income is taxed at 0%. This is not a deduction — it is built into the tax table itself.
2. Rent relief: Up to ₦200,000 per year (or actual rent paid, whichever is lower) can be deducted from gross income.

Combined, the maximum relief is ₦1,000,000 (₦800K threshold + ₦200K rent). For a ₦5M earner, this is ₦200,000 less than the old CRA of ₦1,200,000 — which is why most mid-to-high earners see a slight tax increase.

New Tax Band Structure

The NTA restructured the income tax bands. Here is a side-by-side comparison of PITA and NTA bands:

Key differences: The NTA introduces a 0% band (the ₦800K threshold), spreads income more gradually across the bands, and pushes the top 24% rate to income above ₦7.9M (compared to above ₦3.2M under PITA). The wider bands at lower rates mean that the NTA is more progressive — it taxes lower amounts at lower rates and only reaches the highest rate at much higher income levels.

Rent Relief (New)

The rent relief is entirely new under the NTA. It was introduced to recognise that housing is a major expense for Nigerian workers, especially in cities like Lagos, Abuja, and Port Harcourt where rents are high.

How It Works

• Maximum relief: ₦200,000 per year
• Actual rent cap: You can only claim the lower of ₦200,000 or your actual annual rent paid
• Evidence required: You must provide proof of rent payment to your employer (tenancy agreement, receipts, or bank transfer evidence)
• Timing: The relief is applied annually. Your employer deducts it when calculating your taxable income for PAYE purposes

If you live in employer-provided accommodation, you cannot claim rent relief. If you own your home outright (no rent or mortgage), you also cannot claim it. The relief is specifically for tenants who pay rent.

Pension Contribution Changes

The pension rules under the NTA align with the Pension Reform Act 2014, but with clearer guidance on the pensionable base:

Employee Contribution

• Rate: Minimum 8% (employee can voluntarily contribute more)
• Base: Basic Salary + Housing Allowance + Transport Allowance
• Tax treatment: Fully deductible from gross income before PAYE calculation

Employer Contribution

• Rate: Minimum 10% of the same base
• Tax treatment: Not taxable income for the employee. The employer can claim it as a business deduction.

The NTA clarifies that only Basic, Housing, and Transport form the pensionable base. Some employers previously included other allowances (meal, utilities, leave) in the calculation. Under the NTA, this is standardised. If your employer uses a different structure (for example, a single gross salary with no allowance breakdown), the full salary may be treated as the pensionable base — consult your HR department or PFA.

NHF, NHIS & Development Levy

National Housing Fund (NHF)

NHF contributions remain at 2.5% of basic salary. The contribution is mandatory for employees earning at or above the national minimum wage. Under the NTA, NHF remains tax-deductible — it reduces your taxable income.

National Health Insurance Scheme (NHIS)

The NHIS employee contribution is 5% of basic salary under the National Health Insurance Authority Act. A significant change under the NTA is that NHIS contributions are no longer tax-deductible. This means NHIS comes out of your after-tax income, increasing your effective tax burden slightly.

Previously under PITA, some employers treated NHIS as a pre-tax deduction. The NTA explicitly removes this treatment. The impact is modest — for an employee with a ₦2M basic salary, NHIS is ₦100,000/year, and the lost deduction means about ₦7,000–₦24,000 more in annual tax (depending on your marginal rate).

Development Levy

The NTA introduces a flat ₦4,000 per year Development Levy. This replaces the various state-level development levies that existed under PITA (which ranged from ₦100 to ₦5,000 depending on the state). Key points:

• Applies to every individual liable to income tax
• Flat amount — same for all income levels
• Collected through PAYE by employers
• Paid to the relevant state government

Impact by Income Level

The NTA affects different income levels differently. Here is how the annual PAYE tax changes for employees at various salary levels (assuming standard 40/20/20/20 salary structure and standard deductions):

The pattern is clear: low earners benefit, mid-to-high earners pay slightly more. The crossover point is roughly around ₦2M annual gross — below this, the NTA is better; above this, PITA was more favourable. The difference is most pronounced in the ₦3M–₦10M range, where the lost CRA relief has the largest impact.

To check the exact impact on your salary, use our Nigeria PAYE Calculator which shows both PITA and NTA results side by side.

Implementation Timeline

• Q4 2025: NTA signed into law. FIRS issues implementation guidelines.
• January 1, 2026: NTA takes effect. Employers must begin using new tax bands and deduction rules for PAYE.
• January–March 2026: Grace period for employers to update payroll systems. FIRS accepts PITA-based filings during this window.
• April 2026: Full enforcement begins. All PAYE remittances must be calculated under NTA rules.
• January 2027: First full annual returns under the NTA due.

If your employer has not yet updated your payslip to reflect the NTA calculations, raise it with your HR department. They may owe you a refund (if you are a low earner who overpaid) or need to collect arrears (if you are a higher earner who underpaid during the grace period).

For step-by-step calculation instructions with a worked example, see our companion article: How to Calculate PAYE Tax in Nigeria (2026 NTA Guide).