The Nigeria Tax Act 2025 (NTA) took effect on 1 January 2026, replacing several longstanding tax laws with a single consolidated framework. For employers running payroll, the changes are significant: the familiar Consolidated Relief Allowance is gone, a new Rent Relief takes its place, and the PAYE tax bands have been restructured from the ground up. This guide covers what changed, how it affects take-home pay, and what employers need to do.
What the NTA replaced
The NTA 2025 consolidated and replaced four major pieces of legislation: the Personal Income Tax Act (PITA), the Companies Income Tax Act (CITA), the Value Added Tax Act, and several supplementary tax statutes. For payroll purposes, the PITA replacement is what matters most. Every rule you previously followed for computing PAYE under PITA now needs to be re-evaluated against the NTA framework.
The consolidation means fewer separate Acts to reference, but it also means payroll systems, spreadsheets, and manual calculations built around the old PITA rules are now outdated.
CRA abolished, Rent Relief introduced
Under PITA, employees received a Consolidated Relief Allowance (CRA) before PAYE was computed. The CRA was 20% of gross income plus the higher of ₦200,000 or 1% of gross income, per year. This amount was subtracted from gross income to arrive at taxable income, and the PAYE tax bands were then applied to the result.
The NTA abolished the CRA entirely. In its place, a new Rent Relief was introduced. The Rent Relief is 20% of the annual rent the employee pays, capped at ₦500,000 per year, and only where the rent is documented. An employee who pays no rent gets no Rent Relief, so for many employees the relief is smaller than the CRA it replaced.
Pension contributions and NHF deductions are still subtracted from gross income before the Rent Relief and tax bands are applied. That part of the calculation has not changed.
New PAYE tax bands under the NTA
The NTA introduced six new tax bands. The most notable change is the first band: ₦800,000 of taxable income is now taxed at 0%. Under the old PITA, the lowest band was 7% on the first ₦300,000 after CRA. The zero-rate band is a meaningful shift for lower-income employees.
| Taxable income band | Rate |
|---|---|
| First ₦800,000 | 0% |
| Next ₦2,200,000 | 15% |
| Next ₦9,000,000 | 18% |
| Next ₦13,000,000 | 21% |
| Next ₦25,000,000 | 23% |
| Above ₦50,000,000 | 25% |
Source: Nigeria Tax Act 2025, Fourth Schedule.
For example, ₦5,000,000 of annual taxable income pays 0% on the first ₦800,000, ₦330,000 on the next ₦2,200,000 and ₦360,000 on the remaining ₦2,000,000: ₦690,000 a year, or ₦57,500 a month.
Comparing old and new: who benefits, who pays more
The 0% first band means that an employee whose annual taxable income (gross pay less pension, NHF and any Rent Relief) is ₦800,000 or less now pays no PAYE. Under the old PITA system, these employees would have paid tax starting from the 7% band after CRA. For this group, the NTA is a clear improvement.
Mid-range earners also tend to benefit. The wider bands at 15% and 18% mean that a larger portion of their income sits in lower-rate brackets compared to the old PITA structure, where the rates climbed faster through narrower bands (₦300,000, ₦300,000, ₦500,000, ₦500,000 and ₦1,600,000).
At the top end, the picture is slightly different. The NTA's highest rate is 25%, compared to 24% under PITA. High earners with taxable income above ₦50 million pay one percentage point more on the portion above that threshold. The net effect for most high earners is modest, but it is a change worth noting on payslips.
What employers need to do
Every employer running payroll from January 2026 onward needs to make three updates to their payroll process.
First, replace the CRA calculation with the new Rent Relief formula. The CRA logic should be removed entirely and replaced with the Rent Relief: 20% of documented annual rent, capped at ₦500,000.
Second, apply the new six-band PAYE table. The old PITA bands (7%, 11%, 15%, 19%, 21%, 24%) no longer apply. Any spreadsheet, payroll template, or software that still uses them will produce incorrect PAYE figures.
Third, confirm where each employee's PAYE is filed. Employee PAYE is generally remitted to the relevant state internal revenue service, while the Nigeria Revenue Service (NRS, formerly FIRS) handles certain categories of taxpayer. Employers should confirm which applies to each employee and file their monthly PAYE remittances and annual returns in the format that authority now requires.
How SpireSlip helps
SpireSlip was updated for the NTA 2025 before the January 2026 effective date. The system applies the Rent Relief calculation, uses the new six-band PAYE table, and handles the transition for employees whose payroll history spans both the PITA and NTA periods. Employers using SpireSlip do not need to manually update formulas or worry about using outdated tax bands. Every payroll run computes PAYE under the current law, and payslips reflect the correct deductions from the first run onward.