Nigeria Tax Act 2025/26: What It Means for Small Businesses and Your Take-Home Pay

Short answer: What Nigeria's 2025 Tax Act means for employees and small businesses: PAYE bands, rent relief, small company rules, and PAYE deadlines.

Important: This article explains the tax rules in general terms and uses examples for understanding. It is not tax advice. Tax rules and official guidance can change, and your actual position may depend on your income, business structure and location. Confirm your position with a qualified accountant or the relevant tax authority before making tax decisions.

Nigeria's new tax framework has changed how employees calculate PAYE and how businesses approach their tax obligations.

For employees, some of the biggest changes include a 0% first tax band, rent relief and changes to eligible deductions.

For business owners, the rules around small companies, company income tax, VAT, payroll and filing obligations are particularly important.

The Nigeria Tax Act, 2025 applies from 1 January 2026. In this guide, we'll break down the parts that matter most to small business owners, employers and employees without burying you in tax language.

What changed from 1 January 2026?

The new framework affects several areas of taxation, but three changes are especially relevant to ordinary businesses and employees:

• New PAYE tax bands, including a 0% band on the first ₦800,000 of chargeable income.
• Rent relief, which replaces the previous consolidated relief allowance.
• New rules for small companies, including a 0% company income tax rate for qualifying small companies.

There are also rules covering pension, NHF, health insurance, life insurance, tax identification, payroll records, PAYE remittance and other employer responsibilities.

Let's break them down.

1. How the new PAYE tax bands work

One of the biggest changes employees will notice is the new PAYE structure.

The tax is applied to your chargeable income, not simply your gross salary.

That distinction matters.

Your gross salary is the amount you earn before eligible deductions and reliefs. Chargeable income is the amount that remains after applicable deductions and reliefs have been considered.

Under the new bands, the rates are:

The important thing to understand is that you do not pay one tax rate on your entire income.

Each rate applies only to the portion of income that falls within that band.

Example

Suppose your annual chargeable income is ₦3,000,000.

The first ₦800,000 is taxed at 0%.

The remaining ₦2,200,000 falls into the 15% band:

₦2,200,000 × 15% = ₦330,000

That would be an illustrative annual PAYE amount of:

₦330,000 ÷ 12 = ₦27,500 per month

This is only an example. Your actual PAYE depends on your salary and the deductions and reliefs you qualify for.

Want to see what your own numbers look like?

You can use the free Staff Pay Nigeria Tax Calculator to estimate PAYE, pension, NHF and take-home pay under the 2026 rules.

No account is required to start.

2. Rent relief: what employees need to know

The old consolidated relief allowance has been replaced by a rent relief provision.

Under the new rules, an individual can claim a deduction equal to:

20% of annual rent paid, subject to a maximum of ₦500,000.

For example:

• Annual rent of ₦1,000,000: potential relief of ₦200,000
• Annual rent of ₦2,000,000: potential relief of ₦400,000
• Annual rent of ₦2,500,000: potential relief reaches the ₦500,000 maximum
• Annual rent of ₦5,000,000: relief remains capped at ₦500,000

This means paying more than ₦2.5 million in annual rent does not increase the maximum relief beyond ₦500,000.

You need evidence of the rent

Rent relief is not simply a number you enter into a calculator.

You should be able to support the amount you claim.

The relevant guidelines indicate that information such as the following may be required:

• Tenant's name
• Amount of rent paid
• Period covered by the rent
• Landlord's details
• Property address

The relief also follows the period the rent covers.

For example, if ₦2,000,000 is paid for 24 months from January 2026, only the portion relating to 2026 is considered for that year's calculation.

That means the 2026 rent amount would be ₦1,000,000, giving a potential relief of ₦200,000.

If two people share a home, each person may claim relief based on their own share of the rent, subject to the applicable rules and evidence.

3. Other deductions that can affect your take-home pay

Rent is not the only factor that can affect taxable income.

Depending on your circumstances, eligible deductions can include:

• Pension contributions
• National Housing Fund (NHF) contributions
• National Health Insurance Scheme (NHIS) contributions
• Interest on a qualifying loan used to develop your home
• Life insurance premiums
• Annuity premiums

For pension, NHF and NHIS contributions, the amounts actually deducted and remitted matter.

Your payroll records should therefore match what was actually deducted and paid.

Pension contributions

Under the applicable pension framework, the minimum contribution is generally based on:

• 8% employee contribution
• 10% employer contribution

with the calculation applying to at least basic salary, housing and transport allowances where applicable.

Your own employment arrangement may have additional details, so your payroll records should be checked rather than relying on a generic calculation.

4. What if you earn around the minimum wage?

The Nigeria Tax Act provides an exemption for income from employment where the person earns the national minimum wage or less.

However, you should check the current applicable minimum wage and how the rule applies to your particular employment situation before assuming that you owe no PAYE.

This is one area where using a simple salary calculator without understanding the underlying rules can give you the wrong impression.

5. Why your PAYE deduction may look different on your payslip

If your PAYE deduction changed after the new rules came into effect, don't immediately assume that payroll made a mistake.

Ask your HR or payroll team:

1. Which deductions were used to calculate my PAYE?
2. Has my rent information been included where applicable?
3. Are my year-to-date payroll records up to date?

Employers are expected to maintain appropriate records for their employees.

For employees, keeping your own payslips and supporting documents is also useful, particularly where deductions or reliefs need to be verified later.

Need a payslip?

If you already know your salary figures and simply need a professional payslip, Staff Pay also provides a free Payslip Generator.

You can enter the employer, employee, salary and deduction information, customise the document and create a payslip without opening a Staff Pay account.

Important: The generator formats the information you provide. It does not independently confirm that the salary was actually paid, and the figures should always match your real payroll records.

6. What the new tax rules mean for small businesses

The changes are not only about employees.

Business owners also need to understand how the new framework treats companies.

The Nigeria Tax Act provides a 0% company income tax rate for qualifying small companies, while other companies are subject to a 30% company income tax rate.

There is also a 4% development levy on assessable profits, with small companies excluded from that levy.

But there is an important issue here:

What exactly qualifies as a "small company"?

This is an area where businesses should be careful.

The approved copy of the legislation contains a definition based on turnover and fixed assets, including a turnover threshold of ₦100 million or less and total fixed assets of not more than ₦250 million.

However, another published version of the legislation contains a different turnover figure.

There are also separate considerations around professional services and business structure.

Because of this, we do not recommend that a business simply assumes it qualifies for the 0% rate based on one number found online.

If your business is close to the threshold, or if you provide professional services, speak with an accountant or confirm your position directly with the relevant tax authority before relying on the small-company treatment.

Want to estimate your company tax?

Staff Pay's free Tax Calculator also includes a Company Income Tax calculator.

You can enter your turnover, allowable expenses and fixed assets to get an estimate and understand what you may need to set aside.

The result is an estimate for planning. It is not a company tax return or confirmation of your final tax liability.

7. VAT is still part of the picture

VAT is charged at 7.5%.

However, whether your particular business must register, charge VAT and file returns depends on the applicable rules and your circumstances.

This is especially important for small businesses that are growing quickly.

If your turnover is increasing, don't wait until you receive a tax notice to find out what your VAT obligations are.

A qualified accountant can help you determine:

• Whether you need to register
• Whether you need to charge VAT
• What records you need to keep
• What returns you need to file
• What deadlines apply to your business

Planning your VAT?

You can also use the Staff Pay Tax Calculator to estimate VAT and understand how much you may need to set aside.

It is useful for planning, but it does not file your VAT return or confirm that your tax has been remitted.

8. Employer duties don't disappear because you're a small business

Being a small business does not automatically mean you have no payroll or tax responsibilities.

If you employ people, you need to pay attention to your employer obligations.

These can include:

• Registering with the relevant tax authority
• Obtaining a Tax ID
• Registering as an employer where required
• Calculating PAYE
• Deducting PAYE from employee income
• Remitting PAYE
• Keeping payroll records
• Filing required returns

PAYE can apply to more than basic salary. Depending on the circumstances, taxable employment income can include items such as bonuses, overtime and other payments.

Temporary staff and other categories of workers can also require careful treatment.

9. Where does an employee's PAYE go?

For employees resident in a state, PAYE generally goes to the relevant State Internal Revenue Service.

For residents of the Federal Capital Territory, the relevant FCT authority applies.

Certain categories of taxpayers are handled differently, including some non-residents, diplomats and members of the armed forces.

If you're unsure where your PAYE should be remitted, confirm with your payroll team or the relevant tax authority rather than assuming.

10. When must employers remit PAYE?

Timing matters.

The 2026 Joint Revenue Board guidelines state that PAYE should be remitted by the 10th day of the month following the month in which the deduction was made.

Employers also have an annual return obligation, with the annual return due by 31 January for the previous year.

There are penalties for failing to meet tax filing and remittance obligations.

Because different parts of the tax framework contain different provisions around timing and penalties, businesses should use the official guidance applicable to their situation and confirm requirements with their State tax authority or accountant.

A simple rule for payroll teams

Don't wait until the deadline.

Set your internal payroll calendar so that PAYE, pension and other statutory obligations are reviewed and processed ahead of the official due dates.

11. Keep your payroll records

Good payroll records are not just useful for your accountant.

They help you answer basic questions such as:

• How much did we pay each employee?
• How much PAYE was deducted?
• How much pension was deducted?
• How much NHF was deducted?
• What was actually remitted?
• What did the employee receive?
• What is the employee's year-to-date position?

The applicable framework requires businesses to retain relevant records for a period of years. Six years is an important record-keeping period under the tax framework discussed here.

If your payroll is still being managed through spreadsheets, handwritten records or scattered bank transfers, this is a good time to review your process.

12. A simple tax and payroll checklist for your business

If you run a Nigerian business with employees, use this as a starting point for your next payroll review.

Business

• Confirm that your business has a Tax ID.
• Confirm your business structure and tax obligations.
• Check whether you qualify for the small-company treatment.
• If your business is close to the relevant thresholds, ask an accountant to confirm your position.

Employees

• Collect the information needed to calculate PAYE correctly.
• Keep appropriate rent documentation where employees are claiming rent relief.
• Confirm pension contributions are correctly calculated and remitted.
• Confirm NHF deductions where applicable.
• Keep accurate year-to-date payroll records.

Tax deadlines

• Record your monthly PAYE deadline.
• Record your pension remittance deadline.
• Record your annual tax return deadline.
• Keep evidence of remittances.

Payroll

• Make sure payslips match actual payments.
• Keep payroll records for the required period.
• Don't rely on a calculator as a substitute for tax filing or professional advice.

13. Don't forget invoices and business payments

Tax is only one part of running a small business.

You also need to get paid.

For many Nigerian SMEs, the cycle looks something like this:

Do the work, send an invoice, receive payment, pay staff, keep records, and repeat.

That is why Staff Pay also provides a free Invoice Generator for businesses, freelancers and service providers.

You can create a professional invoice with:

• Your business information
• Customer information
• Your logo
• Products or services
• Line items
• Amounts
• Bank details
• Issue and due dates

You can download, print or email the finished invoice.

The free generator also helps verify the bank details shown on the invoice so customers can see the correct account information.

Need an invoice right now?

Create a free Staff Pay invoice with the Invoice Generator without opening an account.

The free generator does not hold your client's money. Your customer pays the bank account shown on the invoice.

If you later need saved customers, payment tracking, reminders and in-product payment workflows, Staff Pay's full invoicing tools provide the next step.

14. How Staff Pay can help with payroll and business payments

Tax compliance becomes much easier when your payroll records are organised from the beginning.

Staff Pay helps businesses manage payroll and employee payments from one place.

You can use Staff Pay to manage things such as:

• Employee payroll
• PAYE calculations and estimates
• Pension and NHF payroll deductions
• Payslips
• Payment records
• Staff payment requests
• Payroll history
• Team payouts
• Recurring payments
• Bonuses and deductions
• Multiple companies
• Invoices and business payments

After a payroll run, employees can also have access to their payment information and payslips.

The important distinction is that Staff Pay helps you organise and automate payroll and business payments. It does not replace your accountant or the tax authority.

Tax figures shown within payroll should be treated as estimates unless and until they have been reviewed and confirmed for your specific circumstances.

15. Three free Staff Pay tools for Nigerian businesses

If you are not ready for a full payroll or business payment system, you can start with the free tools.

1. Calculate your tax

Use the Staff Pay Tax Calculator to estimate PAYE, take-home pay, payroll cost, VAT, WHT, company income tax and other tax scenarios.

No account required to start.

2. Create a payslip

Use the Staff Pay Payslip Generator when you need a professional salary slip based on figures you provide.

No account required.

3. Create an invoice

Use the Staff Pay Invoice Generator to create professional invoices with your business information, customer details and verified bank information.

No account required.

These tools are useful individually, but they also show the bigger picture.

If you find yourself creating the same documents and running the same calculations every month, that is where payroll and business payment automation starts to make sense.

Frequently Asked Questions

When did the Nigeria Tax Act 2025 take effect?

The Nigeria Tax Act, 2025 applies from 1 January 2026. Tax periods that ended before that date remain subject to the applicable previous framework.

What are the new PAYE tax bands in Nigeria?

The first ₦800,000 of annual chargeable income is taxed at 0%. The next ₦2.2 million is taxed at 15%, followed by bands at 18%, 21%, 23% and 25% for income above ₦50 million.

Each rate applies only to the portion of income within that band.

What is rent relief under the new Nigerian tax rules?

Rent relief allows an individual to claim 20% of annual rent paid, subject to a maximum relief of ₦500,000.

Appropriate information and evidence may be required to support the claim.

Do small companies pay company income tax?

Qualifying small companies are subject to a 0% company income tax rate under the new framework.

However, businesses should confirm that they actually meet the definition of a small company. Published versions of the legislation contain differences around the turnover threshold, so businesses should confirm their position with the relevant tax authority or a qualified accountant.

When must employers remit PAYE?

The 2026 Joint Revenue Board guidelines state that PAYE should be remitted by the 10th day of the month following the month in which the deduction was made.

Employers also have an annual return deadline of 31 January for the previous year.

Do minimum-wage earners pay PAYE?

The Nigeria Tax Act provides an exemption for employment income where the individual earns the national minimum wage or less.

The applicable minimum wage and the exact circumstances should be confirmed before relying on the exemption.

How do I estimate my take-home pay under the new tax rules?

Start with your gross income, identify eligible deductions and reliefs such as pension, NHF and rent relief where applicable, calculate your annual chargeable income and then apply the relevant PAYE bands.

You can use the free Staff Pay Tax Calculator to get an estimate.

The result is an estimate and does not replace tax filing or professional advice.

Can I create a payslip for free?

Yes. Staff Pay's free Payslip Generator lets you create and preview a payslip without opening a Staff Pay account.

Remember that the generator formats the information you provide. It does not prove that the salary was actually paid.

Can I create an invoice for free?

Yes. Staff Pay's free Invoice Generator lets Nigerian businesses, freelancers and service providers create professional invoices without opening an account.

You can include your business details, customer information, line items, amounts and bank details.

The free generator does not prove that an invoice has been paid.

When should you speak to an accountant?

A tax calculator can help you understand the numbers.

It cannot tell you everything about your particular tax position.

Consider speaking with an accountant if:

• Your business is close to the small-company threshold.
• You provide professional services.
• You operate as a sole trader or under a registered business name.
• Your business has multiple income sources.
• You have employees in different states.
• You are unsure where PAYE should be remitted.
• You are unsure whether you need to register for VAT.
• You have received a tax notice.
• You are unsure which deductions or reliefs apply to you.

The cost of getting professional advice can be much smaller than the cost of getting your tax position wrong.

Understand your numbers before payday

The new Nigerian tax rules may look complicated at first, but the basic idea is straightforward:

Know your income. Know your eligible deductions. Know your deadlines. Keep your records.

For employees, the biggest questions are usually around PAYE, rent relief and take-home pay.

For business owners, the bigger picture includes payroll, PAYE, pension, records, VAT, company income tax and filing obligations.

You don't need to understand every section of the tax legislation to run payroll properly. But you do need a reliable process and accurate records.

If you want to estimate your take-home pay under the 2026 rules, start with the free Staff Pay Tax Calculator.

If you need a professional payslip, use the Staff Pay Payslip Generator.

If you need to bill a customer, use the Staff Pay Invoice Generator.

And when you are ready to move beyond individual documents and manual processes, Staff Pay brings payroll, invoices, beneficiaries, schedules and business payments into one place.

Staff Pay: payroll and business payments, automated.

Disclaimer: This article is provided for general educational purposes only. It is not tax, legal or accounting advice. Tax legislation, regulations and administrative guidance may change, and the application of the rules can depend on individual and business circumstances. Confirm your position with the relevant tax authority or a qualified tax professional before relying on the information in this article.