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, source-checked on June 18, 2026 against the Nigeria Tax Act 2025 reform pages, current personal income tax summaries, PenCom pension guidance, and National Housing Fund law.
For an instant, personalized estimate, use the AfroTools Nigeria PAYE Calculator. It lets you compare old PITA treatment with the NTA 2026 regime, switch pension, NHF and rent-relief assumptions, and export a practical payslip-style breakdown.
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 income in tax. For 2026 payroll, the important change is that the old Personal Income Tax Act bands and Consolidated Relief Allowance are no longer the main planning assumption. The Nigeria Tax Act 2025 introduced a wider 0% band, new higher-income bands, and rent relief in place of the old CRA structure.
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: Apply Current NTA 2026 Reliefs
Under the old PITA system, many payroll estimates started with the Consolidated Relief Allowance of 20% of gross income plus the higher of ₦200,000 or 1% of gross income. For 2026 NTA calculations, do not use that old CRA formula as the default.
Current summaries of the Nigeria Tax Act show a 0% band on the first ₦800,000 of annual taxable income and rent relief equal to 20% of annual rent paid, capped at ₦500,000, where the worker can support the claim. If you do not have rent evidence or your employer does not apply it in payroll, your no-rent-relief PAYE estimate will be higher.
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 approved pension, NHF and any supported reliefs from gross income, the remaining annual taxable income is taxed at the NTA 2026 progressive rates:
| Annual Taxable Income Band | Tax Rate | Cumulative Tax |
|---|---|---|
| First ₦800,000 | 0% | ₦0 |
| Next ₦2,200,000 | 15% | ₦330,000 |
| Next ₦9,000,000 | 18% | ₦1,950,000 |
| Next ₦13,000,000 | 21% | ₦4,680,000 |
| Next ₦25,000,000 | 23% | ₦10,430,000 |
| Above ₦50,000,000 | 25% | Depends on income above the band |
How Much Is Your Take-Home Pay? Monthly Gross to Net Salary Table
The table below shows approximate monthly take-home pay at various salary levels under NTA 2026. These calculations assume basic salary is 40% of gross, housing allowance is 20%, transport allowance is 15%, pension is 8% of those three components, NHF is 2.5% of basic salary, and no rent relief is claimed. Actual figures may vary based on your employer's salary structure, state payroll practice, rent evidence, and other approved deductions.
| Monthly Gross | Annual Gross | Monthly PAYE | Monthly Pension (8%) | Monthly NHF | Monthly Take-Home | Effective Tax Rate |
|---|---|---|---|---|---|---|
| ₦100,000 | ₦1,200,000 | ₦3,950 | ₦6,000 | ₦1,000 | ₦89,050 | 4.0% |
| ₦250,000 | ₦3,000,000 | ₦24,875 | ₦15,000 | ₦2,500 | ₦207,625 | 10.0% |
| ₦500,000 | ₦6,000,000 | ₦66,200 | ₦30,000 | ₦5,000 | ₦398,800 | 13.2% |
| ₦1,000,000 | ₦12,000,000 | ₦149,900 | ₦60,000 | ₦10,000 | ₦780,100 | 15.0% |
| ₦2,000,000 | ₦24,000,000 | ₦343,100 | ₦120,000 | ₦20,000 | ₦1,516,900 | 17.2% |
| ₦5,000,000 | ₦60,000,000 | ₦990,000 | ₦300,000 | ₦50,000 | ₦3,660,000 | 19.8% |
Note: These are illustrative approximations. If you can claim rent relief, if your employer calculates NHF on a different basic-salary split, or if health insurance and other approved deductions apply, use the AfroTools PAYE Calculator for your own scenario.
Key Observations from the Table
- The first band is now zero-rated: The first ₦800,000 of annual taxable income is taxed at 0%, which is why very low taxable income can still have no PAYE after approved deductions.
- The middle class needs scenario checks: At ₦500,000 monthly under the no-rent-relief assumption, you keep about 79.8% of gross income after PAYE, pension and NHF. Rent relief can improve the result if it is supported.
- High earners do not pay 25% on everything: Even at ₦5,000,000 monthly, the effective PAYE rate in this example is around 19.8%, below the top marginal rate because earlier bands are taxed at lower rates.
- 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.
What Does Each Deduction Mean?
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) and state revenue authorities remain central to payroll compliance, while the law changes the personal income tax bands and relief structure. Treat this guide as a planning estimate, not as a filing instruction.
Pension Contribution
The employee pension contribution of 8% applies under the contributory pension scheme, while the employer contributes at least 10%. PenCom guidance describes the minimum total contribution as 18% of monthly emoluments, with the pensionable base not less than basic salary, housing allowance and transport allowance. Many payroll templates use those three components, but your employment contract may define pensionable emoluments more specifically.
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 2025, effective from January 1, 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 and low-income relief: Employees earning not more than the ₦70,000 monthly national minimum wage are not liable to PAYE deductions, and current reform notes also describe annual gross income up to about ₦1,200,000 as exempt because it translates to about ₦800,000 taxable income.
- CRA replaced for 2026 planning: The old CRA formula is no longer the default 2026 calculation. Rent relief of 20% of annual rent, capped at ₦500,000, is now the practical relief to model where the worker can support it.
- New progressive bands: The annual taxable-income bands now run from 0% on the first ₦800,000 to 25% above ₦50,000,000, which changes both low-income and executive payroll estimates.
- 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, rent relief 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
Additional deductions or reliefs may be available, depending on your records and payroll setup:
- 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.
Quick Payslip Audit Checklist
Before you challenge a deduction or accept a new offer, collect the details that affect your real take-home pay. A one-line gross salary is not enough for a reliable PAYE estimate.
- Confirm the salary period: Know whether the figure is monthly, annual, gross, net, or total cost to company.
- Ask for the salary split: Pension and NHF can depend on basic salary, housing and transport rather than every allowance in the package.
- Separate employee and employer pension: Your 8% employee contribution reduces take-home pay. The employer's 10% contribution is a benefit, but it should not be subtracted from your net salary.
- Check rent relief evidence: If payroll applies NTA 2026 rent relief, keep rent receipts, tenancy agreements or other records your employer or adviser requires.
- Compare old and new regimes where relevant: If you are reconciling a 2025 payslip, use the old PITA mode. For 2026 payroll planning, use the NTA 2026 mode.
- Keep filing boundaries clear: Use calculators for planning and variance checks, then confirm official remittance, state PAYE filing and dispute steps with your employer, the relevant state tax authority or a licensed adviser.
Sources Checked on June 18, 2026
This guide was refreshed against official and specialist references available on June 18, 2026. Nigeria payroll rules can still change through official notices, state tax administration guidance, or employer implementation practice.
- Presidential Fiscal Policy and Tax Reforms Committee: gazetted tax reform Acts released by the National Assembly.
- Presidential Fiscal Policy and Tax Reforms Committee: exemptions and reliefs effective from January 1, 2026.
- PwC Worldwide Tax Summaries: Nigeria individual income tax rates, last reviewed May 29, 2026.
- National Pension Commission: contributory pension scheme FAQ.
- Federal Mortgage Bank of Nigeria: National Housing Fund Act.
Frequently Asked Questions
How much tax do I pay on a ₦500,000 salary in Nigeria?
On a gross monthly salary of ₦500,000, a no-rent-relief NTA 2026 estimate with the article's salary split gives about ₦66,200 monthly PAYE, ₦30,000 pension, ₦5,000 NHF and roughly ₦398,800 take-home. Use the PAYE Calculator for your exact salary structure.
What is the minimum taxable income in Nigeria 2026?
Under the NTA 2026 rules, the first ₦800,000 of annual taxable income is taxed at 0%, and employees earning not more than the ₦70,000 monthly national minimum wage are not liable to PAYE deductions.
What deductions come out of my salary in Nigeria?
Standard payroll deductions can include PAYE income tax under the 2026 bands, employee pension contribution of 8% of qualifying monthly emoluments, National Housing Fund contribution of 2.5% of basic salary, and health insurance or other approved deductions where your employer applies them.
How is PAYE calculated under the NTA 2026?
For 2026 NTA estimates, start with annual employment income, deduct approved pension, NHF and other allowable deductions, apply any supported rent relief, then tax the remaining annual taxable income at 0% on the first ₦800,000, 15% on the next ₦2,200,000, 18% on the next ₦9,000,000, 21% on the next ₦13,000,000, 23% on the next ₦25,000,000 and 25% above ₦50,000,000.
Is there a free PAYE calculator for Nigeria?
Yes. The AfroTools Nigeria PAYE Calculator is free, requires no sign-up, and computes take-home pay, PAYE tax, pension, NHF, rent relief and optional deductions for NTA 2026 planning. It also includes an old PITA mode for comparison and 2025 payslip checks.