What a salary takes home
Enter a gross salary (monthly or yearly), the state the employee lives in, and whether pension and NHF apply. Optional: the basic, housing and transport split, and rent paid for rent relief. The answer shows PAYE, employee pension, NHF and take-home pay for the month and the year, the effective PAYE rate, the PAYE band by band, and the state revenue service the PAYE goes to.
Figures follow the Nigeria Tax Act rules as of the month selected, using the same engine Sawa runs payroll on. They are a guide, not tax advice.
Sawa does this for every person, every month — Ask for a spot or book a demo.
How PAYE works in Nigeria from 2026
PAYE means Pay As You Earn. It is the income tax an employer takes from each salary and pays to the tax office on the employee's behalf. The employee sees it as a line on the payslip. The employer is the one who must get it right and pay it on time.
From 1 January 2026, PAYE follows the Nigeria Tax Act 2025 and the Nigeria Tax Administration Act 2025. Pay for 2025 and earlier used the old Personal Income Tax Act rules. This guide and the calculator above cover pay from January 2026.
In short: take the year's gross pay, take off pension, NHF and any reliefs to get taxable income, run that through the bands, then divide by 12 for the month. The rest of this page goes through each step, with real numbers.
The PAYE bands for 2026
Taxable income for the year is taxed in slices. Each rate applies only to its own slice, never to the whole income. Moving into a higher band does not raise the tax on the money below it.
| Slice of taxable income | Rate |
|---|---|
| First ₦800,000 (tax-free) | 0% |
| Next ₦2,200,000 (₦800,001 – ₦3,000,000) | 15% |
| Next ₦9,000,000 (₦3,000,001 – ₦12,000,000) | 18% |
| Next ₦13,000,000 (₦12,000,001 – ₦25,000,000) | 21% |
| Next ₦25,000,000 (₦25,000,001 – ₦50,000,000) | 23% |
| Above ₦50,000,000 | 25% |
Put simply: the first ₦800,000 at 0%, the next ₦2,200,000 at 15%, the next ₦9,000,000 at 18%, the next ₦13,000,000 at 21%, the next ₦25,000,000 at 23%, anything above ₦50,000,000 at 25%.
Two things from the old rules are gone. There is no consolidated relief allowance (CRA), and there is no minimum tax. The first ₦800,000 of taxable income is tax-free instead.
What counts as taxable pay
Start with gross pay for the year: basic salary plus allowances such as housing and transport. From that, take off:
- the employee's pension contribution;
- NHF, for an employee who has opted in;
- reliefs the employee has claimed and the employer has accepted, such as rent relief.
What is left is taxable income, and that is what the bands apply to.
A bonus, arrears, overtime or commission is taxed once, at the margin: the PAYE on the year's pay with it, minus the PAYE without it. Pension and NHF are different for each: arrears are late basic pay, so pension and NHF are taken from them. Overtime has pension taken from it, but no NHF. A bonus or commission has no pension or NHF taken from it at all; only PAYE.
Interns and NYSC members pay PAYE only, with no pension and no NHF. For an NYSC member, PAYE is on the employer's top-up only.
A loan from the employer at less than the monetary policy rate (MPR) is a taxable benefit. Each month, the interest the employee doesn't pay is added to their taxable pay. A salary advance is taxed in the month of the salary it advances, and comes back out of that month's net pay.
Pension
The employee pays 8% of basic, housing and transport. The employer adds 10% of the same amount on top of the salary. The employee's 8% comes off taxable income, so it lowers their PAYE. The employer's 10% is a cost to the business; it does not come out of the employee's pay.
Pension is compulsory once a company has 3 employees. Below that, it is the company's choice. When a company has pension on, it is taken and paid at any headcount.
That is the compulsory contribution. On top of it, an employee or the employer can pay voluntary contributions into the same pension account. Sawa's payroll does not take voluntary contributions yet, so they are paid to the PFA directly.
Both shares go to each employee's own Pension Fund Administrator (PFA), by the 7th of the month after the payroll month.
NHF (National Housing Fund)
NHF is 2.5% of basic salary only, not of housing or transport. It is taken only for an employee who has opted in. The company cannot enrol or remove anyone. NHF comes off taxable income, so it lowers PAYE a little too.
NHF goes to the Federal Mortgage Bank of Nigeria (FMBN), by the 10th of the month after the payroll month.
Rent relief and other reliefs
Rent relief is 20% of the rent the employee pays in the year, up to ₦500,000 a year, with documentary evidence. Rent of ₦1,800,000 a year gives a relief of ₦360,000. Rent of ₦3,000,000 a year would give ₦600,000, so the cap applies and the relief is ₦500,000.
These are taken off in full: National Health Insurance (NHIS) contributions, with evidence; life insurance; deferred annuity; and interest on a loan for a house the employee lives in.
In Sawa, the employee claims a relief and the owner or an admin accepts it. Payroll uses accepted claims only, and no one can accept their own. The calculator above takes rent only.
Where PAYE goes
PAYE goes to the revenue service of the state where the employee lives. Not where the company is registered, and not where the office is. A company in Lagos with a staff member who lives in Ogun pays that person's PAYE to Ogun.
So a company with staff in three states pays three state revenue services each month. A Tax ID on file, or the lack of one, does not change where PAYE goes. PAYE for someone with no Nigerian state of residence goes to the Nigeria Revenue Service.
When PAYE is due
PAYE is due by the 10th of the month after the payroll month. October pay means PAYE by 10 November.
The company pays the PAYE and files its own returns. Sawa works out each person's PAYE, shows what the company owes to each state and by when, and keeps track until it is paid. Sawa does not file PAYE returns for companies.
How the month's PAYE is worked out
The monthly figure is the year's PAYE divided by 12. When someone works only part of a month, it is scaled by the working days they worked. Working days follow the person's schedule, or the company's, or Monday to Friday; public holidays are paid days off.
Worked examples
These come from the calculator above, for October 2026. Try them yourself; you should see the same figures.
Example 1: ₦150,000 a month in Lagos
Gross pay ₦150,000 a month. No salary split, so the whole amount is treated as basic pay. Pension on, no NHF, no rent relief. Lives in Lagos.
| Line | Amount |
|---|---|
| Gross pay for the year | ₦1,800,000 |
| Less employee pension (8%) | − ₦144,000 |
| Taxable income | ₦1,656,000 |
| First ₦800,000 at 0% | ₦0 |
| Next ₦856,000 at 15% | ₦128,400 |
| PAYE for the year | ₦128,400 |
| Line | Amount |
|---|---|
| PAYE | ₦10,700 |
| Employee pension | ₦12,000 |
| Take-home pay | ₦127,300 |
Effective PAYE rate: 7.13% of gross pay. The PAYE goes to the Lagos State Internal Revenue Service.
Example 2: ₦500,000 a month, with NHF and rent relief
Gross pay ₦500,000 a month: basic ₦250,000, housing ₦150,000, transport ₦100,000. Pension on. The employee has opted in to NHF and pays ₦1,800,000 a year in rent. Lives in Lagos.
| Line | Amount |
|---|---|
| Gross pay for the year | ₦6,000,000 |
| Less employee pension (8%) | − ₦480,000 |
| Less NHF (2.5% of basic) | − ₦75,000 |
| Less rent relief (20% of rent) | − ₦360,000 |
| Taxable income | ₦5,085,000 |
| First ₦800,000 at 0% | ₦0 |
| Next ₦2,200,000 at 15% | ₦330,000 |
| Next ₦2,085,000 at 18% | ₦375,300 |
| PAYE for the year | ₦705,300 |
| Line | Amount |
|---|---|
| PAYE | ₦58,775 |
| Employee pension | ₦40,000 |
| NHF | ₦6,250 |
| Take-home pay | ₦394,975 |
Effective PAYE rate: 11.76% of gross pay. The PAYE goes to the Lagos State Internal Revenue Service. The employer also pays pension of 10% of ₦500,000, which is ₦50,000 a month. That is on top of the salary, so this hire costs the business ₦550,000 a month.
Example 3: ₦1,500,000 a month in Abuja
Gross pay ₦1,500,000 a month, treated as basic pay. Pension on, no NHF, no rent relief. Lives in the Federal Capital Territory.
| Line | Amount |
|---|---|
| Gross pay for the year | ₦18,000,000 |
| Less employee pension (8%) | − ₦1,440,000 |
| Taxable income | ₦16,560,000 |
| First ₦800,000 at 0% | ₦0 |
| Next ₦2,200,000 at 15% | ₦330,000 |
| Next ₦9,000,000 at 18% | ₦1,620,000 |
| Next ₦4,560,000 at 21% | ₦957,600 |
| PAYE for the year | ₦2,907,600 |
| Line | Amount |
|---|---|
| PAYE | ₦242,300 |
| Employee pension | ₦120,000 |
| Take-home pay | ₦1,137,700 |
Effective PAYE rate: 16.15% of gross pay. The PAYE goes to the FCT Internal Revenue Service.
Let Sawa do this every month
Sawa runs this for every person, every month: PAYE by state, pension by PFA, NHF and contractor withholding tax, with what you owe and when in one place. See how Sawa runs payroll, book a demo or ask for a spot. Paying contractors too? Try the withholding tax calculator.
Questions people ask
What are the PAYE rates in Nigeria for 2026?
On annual taxable income: the first ₦800,000 at 0%, the next ₦2,200,000 at 15%, the next ₦9,000,000 at 18%, the next ₦13,000,000 at 21%, the next ₦25,000,000 at 23%, anything above ₦50,000,000 at 25%.
How much can someone earn before paying PAYE?
The first ₦800,000 of taxable income a year is tax-free. Taxable income is gross pay less employee pension, NHF and accepted reliefs, so gross pay can be a little higher than ₦800,000 before any PAYE is due.
Is there still a consolidated relief allowance (CRA)?
No. From 2026 there is no CRA and no minimum tax. Employee pension, NHF, rent relief and the other reliefs come off gross pay, and the first ₦800,000 of taxable income is taxed at 0%.
Does pension reduce PAYE?
Yes. The employee's 8% pension, on basic, housing and transport, comes off taxable income. The employer's 10% is paid on top of salary and is not deducted from the employee.
How does rent relief work?
It is 20% of the rent paid in the year, up to ₦500,000 a year, with documentary evidence. For example, ₦1,800,000 of rent gives ₦360,000 of relief.
Which state do I pay PAYE to?
The state where the employee lives, not where the company is. Staff in different states mean different state revenue services. PAYE for someone with no Nigerian state of residence goes to the Nigeria Revenue Service.
When is PAYE due?
By the 10th of the month after the payroll month. Pension is due by the 7th, to each employee's PFA, and NHF by the 10th, to the Federal Mortgage Bank of Nigeria.
Does Sawa file PAYE returns for my company?
No. Sawa works out each person's PAYE, shows what you owe to each state and by when, and keeps track until it is paid. The company pays the PAYE and files its own returns.