Every month, millions of Nigerian employees receive their salary with deductions they may not fully understand. Between PAYE income tax, pension contributions, the National Housing Fund, and other statutory deductions, your take-home pay can be significantly less than your gross salary. This guide provides a complete breakdown of salary after tax in Nigeria for 2026, updated to reflect the Nigeria Tax Act (NTA) 2026 provisions.
For an instant, personalized calculation, use the AfroTools Nigeria PAYE Calculator — it handles all the math automatically and is always up to date with current tax legislation.
How Nigerian Salary Tax Works in 2026
Nigeria uses a Pay-As-You-Earn (PAYE) system where employers deduct income tax from employees' salaries before payment. The tax is progressive, meaning higher income earners pay a higher percentage of their income in tax. Before calculating PAYE, several reliefs and deductions are applied to reduce your taxable income.
Step 1: Determine Gross Annual Income
Your gross income includes all compensation from employment: basic salary, housing allowance, transport allowance, utility allowance, meal allowance, and any other benefits. Employers typically structure salaries with a basic component (usually 40-60% of gross) and various allowances making up the remainder. This structure matters because some deductions are calculated specifically on the basic salary.
Step 2: Calculate the Consolidated Relief Allowance (CRA)
The CRA is the most important tax relief for Nigerian employees. It is calculated as:
- 20% of Gross Income, plus
- The higher of ₦200,000 or 1% of Gross Income
For example, on a gross annual income of ₦6,000,000 (₦500,000 monthly), the CRA would be: 20% × ₦6,000,000 = ₦1,200,000, plus the higher of ₦200,000 or ₦60,000 (1% of ₦6,000,000) = ₦200,000. Total CRA = ₦1,400,000.
Step 3: Deduct Pension and NHF Contributions
Statutory deductions further reduce your taxable income:
- Employee Pension Contribution: 8% of (Basic Salary + Housing Allowance + Transport Allowance). Under the Pension Reform Act, employees contribute a minimum of 8% while employers contribute 10%.
- National Housing Fund (NHF): 2.5% of Basic Salary. This mandatory contribution applies to employees earning above the national minimum wage.
Step 4: Apply PAYE Tax Bands
After subtracting CRA, pension, and NHF from gross income, the remaining taxable income is taxed at progressive rates established under the Personal Income Tax Act as amended by the NTA 2026:
| Annual Taxable Income Band | Tax Rate | Cumulative Tax |
|---|---|---|
| First ₦300,000 | 7% | ₦21,000 |
| Next ₦300,000 | 11% | ₦54,000 |
| Next ₦500,000 | 15% | ₦129,000 |
| Next ₦500,000 | 19% | ₦224,000 |
| Next ₦1,600,000 | 21% | ₦560,000 |
| Above ₦3,200,000 | 24% | — |
Take-Home Pay Table: Monthly Gross to Net Salary
The table below shows the approximate monthly take-home pay at various salary levels. These calculations assume a standard salary structure where basic salary is 40% of gross, housing allowance is 20%, and transport allowance is 15%. Actual figures may vary based on your employer's specific salary structure.
| Monthly Gross | Annual Gross | Monthly PAYE | Monthly Pension (8%) | Monthly NHF | Monthly Take-Home | Effective Tax Rate |
|---|---|---|---|---|---|---|
| ₦100,000 | ₦1,200,000 | ₦1,525 | ₦6,000 | ₦1,000 | ₦91,475 | 1.5% |
| ₦250,000 | ₦3,000,000 | ₦14,792 | ₦15,000 | ₦2,500 | ₦217,708 | 5.9% |
| ₦500,000 | ₦6,000,000 | ₦52,542 | ₦30,000 | ₦5,000 | ₦412,458 | 10.5% |
| ₦1,000,000 | ₦12,000,000 | ₦148,542 | ₦60,000 | ₦10,000 | ₦781,458 | 14.9% |
| ₦2,000,000 | ₦24,000,000 | ₦370,542 | ₦120,000 | ₦20,000 | ₦1,489,458 | 18.5% |
| ₦5,000,000 | ₦60,000,000 | ₦1,066,542 | ₦300,000 | ₦50,000 | ₦3,583,458 | 21.3% |
Note: These are illustrative approximations. For exact figures based on your specific salary structure, use the AfroTools PAYE Calculator.
Key Observations from the Table
- Low-income earners are well-protected: At ₦100,000 monthly, the effective tax rate is only about 1.5%, meaning the CRA successfully shields most of the income from tax.
- The middle class pays moderate rates: At ₦500,000 monthly (a solid mid-career salary in Lagos or Abuja), you keep about 82.5% of your gross income after all deductions.
- High earners approach the 24% ceiling gradually: Even at ₦5,000,000 monthly, the effective rate is around 21.3% — well below the maximum marginal rate of 24%, thanks to the progressive structure and CRA.
- Pension is a significant deduction: The 8% employee pension contribution is not a tax — it is your retirement savings. At higher salaries, this becomes a substantial forced savings mechanism.
Understanding Each Deduction
PAYE Income Tax
PAYE is the income tax deducted at source by your employer. It is remitted to the relevant State Internal Revenue Service (SIRS) where you are resident. Lagos State, for instance, collects PAYE through the Lagos Internal Revenue Service (LIRS). Your employer is legally required to deduct and remit PAYE; failure to do so makes the employer liable for the tax plus penalties.
Under the NTA 2026 provisions, the Federal Inland Revenue Service (FIRS) has streamlined compliance requirements for employers, but the fundamental PAYE structure remains the same progressive system that has been in place since the Personal Income Tax Act amendments.
Pension Contribution
The employee pension contribution of 8% is mandatory for organizations with 3 or more employees under the Pension Reform Act 2014. The contribution is based on the sum of basic salary, housing allowance, and transport allowance — not on the total gross salary. This means if your salary includes significant allowances beyond these three components (such as meal, utility, or car allowances), those portions escape the pension calculation, effectively lowering your pension deduction relative to total gross.
Your pension contribution is tax-deductible and accumulates in your Retirement Savings Account (RSA) managed by a Pension Fund Administrator (PFA) of your choice. Combined with the employer's 10% contribution, this represents an 18% savings rate toward retirement.
National Housing Fund (NHF)
The NHF contribution of 2.5% of basic salary was established by the National Housing Fund Act 1992. It applies to all workers earning above the minimum wage and is designed to create a pool of long-term, low-cost funds for housing development. Contributors can access NHF-backed mortgages through the Federal Mortgage Bank of Nigeria at preferential interest rates, typically around 6% per annum — significantly below commercial mortgage rates.
Other Possible Deductions
- NHIS/Health Insurance: Some employers deduct employee contributions toward the National Health Insurance Scheme or private health insurance plans.
- Union Dues: If you belong to a trade union, monthly dues may be deducted at source.
- Cooperative Contributions: Many workplaces have cooperative societies where members authorize payroll deductions for savings or loan repayments.
- Salary Advances: Repayments for salary advances or staff loans are deducted from monthly pay.
NTA 2026: What Changed?
The Nigeria Tax Act 2026 introduced several reforms that affect salary after tax calculations. For a detailed analysis, see our full guide to NTA 2026 changes. Key provisions affecting employees include:
- Minimum wage exemption: Workers earning the national minimum wage (₦70,000/month) are fully exempt from PAYE, providing relief for the lowest-income formal sector employees.
- Consolidated compliance framework: The NTA 2026 aims to simplify tax administration across multiple revenue streams, making it easier for employers to comply with PAYE obligations.
- Digital filing mandates: Employers are increasingly required to file PAYE returns electronically, which should improve accuracy and reduce disputes between employers, employees, and tax authorities.
- Enhanced penalties for non-compliance: The act strengthens enforcement mechanisms against employers who fail to remit PAYE deductions, protecting employees whose tax is deducted but not paid to the government.
Calculate Your Exact Take-Home Pay
Enter your gross salary into the AfroTools Nigeria PAYE Calculator and get an instant breakdown of PAYE, pension, NHF, and net pay under NTA 2026 rules.
Open PAYE Calculator →How to Maximize Your Take-Home Pay
While you cannot avoid statutory deductions, there are legitimate strategies to optimize your net salary:
1. Negotiate Your Salary Structure
Since pension and NHF are calculated on specific components (basic + housing + transport for pension, basic only for NHF), a salary structure with a lower basic salary and higher non-pensionable allowances can reduce total deductions. However, this also reduces your pension savings and NHF contributions, which have long-term benefits.
2. Claim All Eligible Reliefs
Beyond the CRA, additional tax reliefs may be available:
- Life insurance relief: Premiums paid on life insurance policies are tax-deductible.
- NHIS contributions: National Health Insurance premiums can reduce your taxable income.
- Voluntary pension contributions: Additional pension contributions beyond the mandatory 8% are tax-deductible up to a cap, and the investment income within your RSA grows tax-free.
- Mortgage interest: Home loan interest payments may qualify for tax relief under certain conditions.
3. Ensure Accurate Tax Computation
Errors in PAYE computation are surprisingly common. Verify your payslip against an independent calculation using the AfroTools PAYE Calculator. If your employer is over-deducting, raise the issue with your HR or finance department with supporting calculations.
Salary Benchmarks by Industry
To put these numbers in context, here are approximate monthly gross salary ranges for common roles in Nigeria's major sectors (2026 estimates for mid-career professionals in Lagos):
| Sector / Role | Monthly Gross Range | Approx. Take-Home |
|---|---|---|
| Banking (Officer) | ₦350,000 – ₦600,000 | ₦290,000 – ₦490,000 |
| Tech (Mid-level Developer) | ₦500,000 – ₦1,200,000 | ₦410,000 – ₦935,000 |
| Oil & Gas (Engineer) | ₦800,000 – ₦2,500,000 | ₦640,000 – ₦1,870,000 |
| Telecoms (Manager) | ₦600,000 – ₦1,500,000 | ₦490,000 – ₦1,140,000 |
| FMCG (Brand Manager) | ₦400,000 – ₦800,000 | ₦330,000 – ₦640,000 |
| Civil Service (Grade 10-14) | ₦120,000 – ₦350,000 | ₦105,000 – ₦290,000 |
Frequently Asked Questions
How much tax do I pay on a ₦500,000 salary in Nigeria?
On a gross monthly salary of ₦500,000, your PAYE income tax will be approximately ₦52,500 per month. Combined with pension (₦30,000) and NHF (₦5,000), total deductions are around ₦87,500, leaving you with approximately ₦412,500 take-home. Use the PAYE Calculator for your exact figure.
What is the minimum taxable income in Nigeria 2026?
Under the NTA 2026, workers earning the national minimum wage of ₦70,000 monthly are exempt from PAYE. For those above the minimum wage, the Consolidated Relief Allowance significantly reduces the effective tax on lower incomes, resulting in very low tax rates for salaries under ₦150,000 monthly.
What deductions come out of my salary in Nigeria?
Standard statutory deductions include: PAYE income tax (7%-24% progressive rates on taxable income), Employee Pension Contribution (8% of basic + housing + transport), National Housing Fund (2.5% of basic salary), and possibly NHIS health insurance. The Consolidated Relief Allowance reduces your taxable income before PAYE is calculated.
How is PAYE calculated under the NTA 2026?
First, calculate your Consolidated Relief Allowance (20% of gross income + the higher of ₦200,000 or 1% of gross income). Then subtract CRA, pension contributions, and NHF from gross income to get taxable income. Apply progressive tax bands from 7% (first ₦300,000) up to 24% (above ₦3,200,000). Your employer calculates and deducts this monthly.
Is there a free PAYE calculator for Nigeria?
Yes. The AfroTools Nigeria PAYE Calculator is completely free, requires no sign-up, and computes your take-home pay, PAYE tax, pension, NHF, and all deductions based on current NTA 2026 rules. It works on any device.