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The 2026 tax year brings a breath of fresh air for millions of Nigerian workers. The Nigeria Tax Act 2025 has significantly shifted the tax burden away from low-income earners while introducing creative reliefs to help with the cost of living. If you are an employee or an HR manager, these changes will directly impact your monthly take-home pay.
The New Tax-Free Threshold
As of January 2026, the ‘zero-tax’ bracket has been widened. Individuals earning ₦800,000 or less per year are now completely exempt from Personal Income Tax (PIT). This is a substantial increase from previous years, designed to provide immediate inflation relief to the most vulnerable workers. For those earning above this, the tax is progressive, ranging from 15% to a top rate of 25% for high earners. To see how this compares to business taxes, read CIT vs. PIT: What is the Difference?.
Introducing the 20% Rent Relief
Perhaps the most talked-about reform in 2026 is the Rent Relief. For the first time, taxpayers can deduct 20% of their annual rent (capped at ₦500,000) from their taxable income. To claim this, you must:
- Provide a valid rent receipt from your landlord.
- Declare the payment during your annual tax filing.
- Ensure your landlord’s TIN is included on the receipt (where applicable).
For more on general compliance, check out the Nigerian Tax Compliance Checklist.
Step-by-Step: How to Update Your Payroll
- Recalculate: Apply the new ₦800k exemption to all staff.
- Deduct Rent: Collect rent declarations from employees to apply the new relief.
- File via SIRS: Ensure all PAYE is remitted to the State Internal Revenue Service by the 10th of the following month.
Practical example: An employee earning ₦1.5 million annually now only pays tax on ₦700,000 (after the ₦800k exemption), and that amount is further reduced if they claim Rent Relief. Learn more about penalties for missing these updates in Tax Penalties in Nigeria. For official calculators, visit the LIRS website or read PwC Nigeria’s latest alerts.
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