How to Calculate Tax on Your Salary in Nigeria: 2026 Easy Guide

Understanding how to calculate tax on your salary in Nigeria is one of the most important parts of managing your money in 2026. Many Nigerian workers still struggle to make sense of PAYE tax, taxable income, or why their take-home pay looks smaller than expected. This guide breaks everything down into simple steps so you can calculate your tax on your salary, confirm your PAYE deductions, and understand exactly how much of your income goes to the government.

If you’ve been trying to calculate the tax on your income, this guide offers a straightforward explanation of the entire process.

What Does PAYE Tax Mean in Nigeria?

PAYE tax, or Pay As You Earn, is a personal income tax your employer deducts from your salary each month and remits to the state government. It applies to workers in both the public and private sectors. According to the Federal Inland Revenue Service (FIRS), PAYE is designed to ensure that individuals contribute to public services based on their earnings.

Payroll officers handle this automatically, but understanding how to calculate PAYE tax yourself helps you confirm that your deductions are correct. It also helps when comparing job offers, planning budgets, or tracking your financial goals.

What Counts as Taxable Income in Nigeria

Before calculating tax on your salary, you must know what counts as taxable income. In Nigeria, taxable income is the amount the government uses to determine how much PAYE you should pay. It includes most earnings and allowances tied to your employment.

Income That Counts as Taxable Income

These earnings are included in a typical salary tax calculation in Nigeria:

• Basic salary

• Housing allowance

• Transport allowance

• Utility allowance

• Meal allowance

• Bonus payments

• Leave allowance

• Overtime or shift allowance (if applicable)

All these amounts, when added together, form your gross income, a key part of calculating PAYE tax in Nigeria.

Income That Is Not Taxable

Certain deductions reduce your taxable income because they qualify as reliefs. These include:

• Pension contributions

• National Housing Fund (NHF) contributions

• Life insurance premiums

• Health insurance contributions (where applicable)

These items are essential because subtracting them reduces your tax burden.

Nigeria Tax Rates for 2026 (PAYE Bands)

PAYE in Nigeria uses a progressive tax system, meaning those who earn more pay higher rates. Below are the 2026 personal income tax bands used to calculate PAYE:

Annual Income Band	Tax Rate
First ₦300,000	7%
Next ₦300,000	11%
Next ₦500,000	15%
Next ₦500,000	19%
Next ₦1,600,000	21%
Above ₦3,200,000	24%

These PAYE tax bands form the core of salary tax calculations in Nigeria. Employees with higher taxable income fall into higher brackets.

Important Tax Reliefs You Must Know

Tax reliefs reduce the amount used in calculating your PAYE tax. Without them, your taxable income would be higher, and your tax burden would increase.

1. Consolidated Relief Allowance (CRA)

This is the biggest deduction you receive. CRA is calculated as:

• 20% of gross income, plus

• ₦200,000 flat deduction

It significantly reduces taxable income and is a crucial part of understanding how to calculate salary tax in Nigeria.

2. Pension Contribution

Typically, 8% of your monthly salary, depending on your employer’s structure. This amount is deducted before tax is applied.

3. National Housing Fund (NHF)

A contribution that also reduces taxable income.

These reliefs are important because they allow you to calculate PAYE tax accurately and ensure your employer’s payroll system is deducting the right amounts.

Step-by-Step Guide: How to Calculate Your Salary Tax in Nigeria (2026)

Below is the clearest method to calculate PAYE tax:

Step 1: Add All Your Earnings

Combine:

• Basic salary

• Allowances

• Bonuses

• Any other taxable payments

This gives you your annual gross income.

Step 2: Calculate Your Total Reliefs

Add:

• Pension contribution

• NHF contribution

• Life insurance

• CRA (20% of gross income + ₦200,000)

Step 3: Subtract Total Reliefs

Gross Income – Total Reliefs = Taxable Income

This is what the PAYE tax bands apply to.

Step 4: Apply Nigeria’s Tax Rates

Start from the lowest band (7%) and move upward.

Step 5: Divide by 12

This gives your monthly PAYE deduction.

This method is widely used in payroll systems and is the standard format for calculating salary tax in Nigeria.

Worked Example: PAYE Calculation for a Nigerian Worker 

To illustrate how to calculate PAYE tax in Nigeria, let’s use a salary of ₦350,000 per month.

1. Annual Gross Income

₦350,000 × 12 = ₦4,200,000

2. Pension (8%)

₦350,000 × 8% × 12 = ₦336,000

3. CRA Calculation

• 20% of ₦4,200,000 = ₦840,000

• CRA = ₦840,000 + ₦200,000 = ₦1,040,000

4. Total Reliefs

₦336,000 + ₦1,040,000 = ₦1,376,000

5. Taxable Income

₦4,200,000 – ₦1,376,000 = ₦2,824,000

6. Apply Tax Bands

• First ₦300,000 → 7% = ₦21,000

• Next ₦300,000 → 11% = ₦33,000

• Next ₦500,000 → 15% = ₦75,000

• Next ₦500,000 → 19% = ₦95,000

• Remaining ₦1,224,000 → taxed at 21% = ₦257,040

Useful Salary Tax Tools Nigerians Can Try

You can cross-check your numbers using a PAYE calculator in Nigeria or a personal income tax calculator. They help verify calculations quickly and give a breakdown of deductions.

Calculating tax on your salary in Nigeria may feel complicated at first, but with the right steps, it becomes straightforward. Understanding PAYE tax, taxable income, CRA, pension deductions, and Nigeria’s 2026 tax rates gives you full control over your finances. With this guide, anyone can calculate their salary tax confidently and confirm that their employer is deducting the correct amount.

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