Who is required to pay personal income tax in Nigeria under the 2026 reforms?

Personal income tax (PIT) applies to all individuals who are considered tax residents in Nigeria and earn taxable income above the N800,000 annual exemption threshold.

This includes salaried employees under the PAYE system, freelancers, self-employed persons, business owners, remote workers, and informal earners.

Residency status, rather than nationality, determines liability, meaning individuals who reside in Nigeria and derive income, whether locally or, in certain cases, from abroad, may be required to pay PIT once their taxable income exceeds the exemption limit.

Who is exempt from personal income tax, and what is the new minimum threshold?

Individuals earning the national minimum wage or less are fully exempt from personal income tax. Additionally, the annual gross income of up to approximately N1.2 million, equivalent to roughly N800,000 in taxable income after deductions, falls below the tax threshold.

The reforms also reduce PAYE liabilities for individuals earning up to N20 million annually, while several categories of income remain tax-exempt.

Are Nigerians who earn income in the Diaspora taxable in Nigeria?

The scope of taxable income depends on an individual’s tax residency status under the Nigeria Tax Act 2025.

Tax residents are liable to personal income tax on their worldwide income, regardless of where the income is earned or received. This includes salaries from foreign employers, freelance or contract income from overseas clients, investment income, and gains from digital or online activities.

Non-residents are taxed only on income sourced from Nigeria, such as rental income from Nigerian property or profits attributable to a permanent establishment in Nigeria.

An individual is generally considered a tax resident in Nigeria if they are domiciled in the country, maintain a permanent home available for personal use, have substantial economic or immediate family ties in Nigeria, or are physically present in Nigeria for 183 days or more within 12 months.

Nigeria’s Double Taxation Agreements (DTAs) with several countries provide relief mechanisms to prevent the same income from being taxed twice.

Are remittances, gifts, loans, or bank deposits taxable?

Under the Nigeria Tax Act 2025, remittances, gifts, loans, and bank deposits are not treated as taxable income.

Genuine family support and personal transfers are exempt, as are both cash and non-cash gifts. Loans are not taxable because they are liabilities, not earnings.

Simply holding money in a bank account is not taxed, although interest earned on deposits is subject to a 10 per cent withholding tax. A N50 Electronic Money Transfer Levy applies to electronic transfers of N10,000 or more and is paid by the sender. Banks also report accounts with high transaction volumes to tax authorities for compliance purposes.

Will banks automatically deduct tax from my account or transactions?

Banks do not automatically deduct personal income tax (PAYE) from your account. Tax authorities rely on employer payroll records, self-assessment filings, or audits to collect income tax. While banks report accounts with high transaction volumes or apply small levies like the N50 Electronic Money Transfer Levy (EMTL) on transfers of N10,000 or more, these are not income taxes.

What deductions and reliefs can I legally claim to reduce my tax?

Allowable deductions are expenses incurred wholly, exclusively, necessarily, and reasonably in the production of taxable income.

National Housing Fund (NHF): Mandatory 2.5 per cent of your basic salary contributed to NHF is deductible. This helps fund affordable mortgage loans for contributors.

National Health Insurance Scheme (NHIS): Contributions to NHIS are deductible, ensuring part of your income spent on mandatory health coverage is tax-free.

Pension contributions: Both the statutory 8 per cent employee contribution and approved Additional Voluntary Contributions (AVCs) are deductible, encouraging long-term retirement savings.

Interest on loans for owner-occupied homes: Interest paid on loans for your own residence is deductible, promoting home ownership.

Life insurance and deferred annuity premiums: Premiums paid during the year preceding assessment for personal life or deferred annuity contracts are deductible, supporting long-term financial security. Proof of payment is required.

Rent relief: Up to per centent of annual rent paid, capped at N500,000, is deductible. You must provide tenancy agreements or payment receipts to claim this relief.

What are the new 2026 personal income tax rates and bands?

First N800,000 at 0% ;
Next N2,200,000 at 15% ;
Next N9,000,000 at 18% ;
Next N13,000,000 at 21% ;
Next N25,000,000 at 23% ;
Above N50,000,000 at 25%.

How do I calculate my PAYE step by step under the new rules?

Step 1: Start with Gross Income

Step 2: Subtract Statutory Deductions

These reduce your taxable income:

Pension contribution (8% employee portion)
Rent relief – 20% of annual rent (up to N500,000)
NHIS
NHF contributions (if applicable)
Life insurance and deferred annuity premiums
Interest on loans for owner-occupied homes

Step 3: Apply the New Tax Bands

Tax is applied gradually across all bands, not at a flat rate.

Step 4: Divide by 12 to get the Monthly PAYE

How much tax will I pay on a specific salary (N70,000 and N300,000 gross monthly)?

Gross Monthly Salary: N70,000

Annual gross Income: N840,000

Statutory pension (8%): N5,600 monthly

Taxable income = N70,000 – N5,600 = N64,400 monthly

Annual taxable income = N772,800

The first N800,000 per year is tax-free.

Since this employee earns below that, their PAYE is effectively N0.

Take-Home Pay:

N70,000 – pension and other allowable deductions  = N64,400 net pay

This employee will pay no PIT under the new system.

Step 1: Start with Gross Income

Gross Monthly Salary: N300,000

Annual Gross Salary: N3,600,000

Employee’s annual rent: N600,000

Statutory Pension = 8% of gross salary

NHF = 2.5% of gross salary

Rent Relief: 20% of annual rent (capped at N500,000)

Step 2: Subtract Statutory Deductions

1. Pension (8% of N3,600,000)
= N288,000

2. NHF (2.5% of  N3,600,000)
= N90,000

3. Rent Relief

Annual rent = N600,000

20% × 600,000 = N120,000

Allowed Rent Relief = ₦120,000 (because it is lower than ₦500,000)

Total Annual Deductions = Pension + NHF + Rent Relief
= N288,000 + N90,000 + N120,000
= N498,000

STEP 3: Compute Chargeable Income

Chargeable Income = Gross Income − Total Deductions
= N3,600,000 − N498,000
= N3,102,000

STEP 4: Apply the New Tax Bands

Band 1: First N800,000 @ 0%
Tax = ₦0
Remaining income:
N3,102,000 − N800,000 = N2,302,000

Band 2: Next N2,200,000 @ 15%
15% × 2,200,000 = N330,000
Remaining income:
2,302,000 − 2,200,000 = N102,000

Band 3: Remaining N102,000 @ 18%
18% × 102,000
= N18,360

Therefore,
Annual PAYE
= N0 + N330,000 + N18,360
= N348,360

Step 5: Divide by 12 to get the Monthly PAYE
= N348,360 ÷ 12
= N29,030

How do I file and comply, especially if I’m self-employed or a freelancer?

Personal Income Tax (PIT) is administered by the State Internal Revenue Service (SIRS) in the state where you reside. Salaried employees usually pay through PAYE, which employers deduct and remit monthly. Self-employed individuals, freelancers, and business owners must file annual self-assessment returns.

Step 1: Get or confirm your Tax Identification Number (TIN)
Every taxpayer must have a TIN issued by the relevant tax authority. Individuals typically need a valid ID (NIN, passport, or driver’s licence), BVN (where required), and proof of address.

Step 2: Identify the correct return type and tax authority
Self-employed persons file personal income tax self-assessment returns (commonly Form A or its state equivalent) with the SIRS of their state of residence. Forms are usually available on state IRS websites.

Step 3: Gather supporting documents
Prepare key records such as your TIN, identification, income statements (payslips or business income records), pension and NHF contribution details, bank interest or rental income records, and any withholding tax (WHT) credit notes.

Step 4: File and pay through approved channels
Most states offer e-tax portals (such as Lagos, FCT, and Rivers) that allow online submission of returns and supporting documents. Physical filing is also available at SIRS offices. Taxes due must be paid before the filing deadline to avoid penalties.