Personal Income Tax

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Personal Income tax was reviewed following the Tax Reform Act 2025. The Act makes provision for income tax to be imposed on income of individuals, the gains and profits of companies (which includes chargeable gains, previously charged under Capital Gains Tax) and income accruing, arising or due to an estate or trustee. The Act is effective from 1 January 2026.

Personal Income Tax (PIT) is a direct tax imposed on the personal income of an individual including wages and salaries, rental income, dividends, royalties and director’s fees etc. PIT is paid by resident and non-resident individuals who engage in income-generating or taxable activities in the country.

PAYE

PAYE is a system of taxation by which employers deduct a portion of the income of their employees at source and remit to the relevant tax authority. In Nigeria, PAYE is remitted to the Inland Revenue Service (IRS) of each state, while the Federal Inland Revenue Service (FIRS) oversees PAYE tax for the armed forces nationwide.

Persons Liable to Income Tax

The following categories of ‘Persons’ are liable to tax on their total income for any year of assessment in line with the Act

1.  Individuals, corporation sole or body of individuals deemed to be resident in Nigeria.
2.  Communities and Families.
3.  Trustee of any settlement or trust or estate or an executor of a deceased person.
4. Persons employed in the Nigeria Army, the Nigerian Navy, the Nigeria Air Force, the Nigeria Police force (other than those employed in a civilian capacity),
5. Officers of the Nigeria Foreign Service;
6. Every resident of the Federal Capital Territory, Abuja ; and
7.  A person resident outside Nigeria and derives income or profit from Nigeria.

Chargeability to Tax

An individual may be charged to tax in:

1. the individual’s name;
2. the name of a family, trustee or estate; or
3. the name of an administrator, or any attorney, agent or representative in Nigeria, in same manner and amount as such individual would have been charged if no agent, administrator, attorney, or representative were appointed.

Income Chargeable

The Act provides that Tax shall be payable for each year of assessment on the aggregate amounts each of which is the income of every taxable person for the year from a source inside or outside Nigeria. The following are the various sources of income on which tax shall be payable:

Employment

1. salaries, fees, wages, benefits, allowances, premiums, compensations, bonuses, or other privileges allowed, given to any employee other than payment for expenses incurred in the performance of the duties of the employment, from which it is not intended that the employee makes any profit or gain; and
2. any annuity, pension or any other similar income

Non-Employment

1. gains or profits from any business, trade, vocation or profession for whatever period of time such business or trade may have been carried on
2.   fees, interests, royalties or rents arising from a right granted for the occupation, use or exploitation of any property
3. Premium, dividends, annuities or charges
4. fees, dues, allowances, or any remuneration for services rendered
5. rebates or discounts
6. disposal of money or money instruments
7. gains, profits or income from lending or disposal of securities
8. prizes, grants, laurels, winnings, honoraria, awards, etc.
9. gains or profits from disposing of fixed assets or property
10.  gains or profits from transactions in virtual or digital assets
11.  any other gain, income or profit not falling within the preceding category

Interest, Dividend, Royalty etc

• See comprehensive list

Others

•  Income of a family which is recognized in Nigeria by any custom or law and in the interests of individual members of such family cannot be determined separately. Income on assets inherited before distribution is excluded.
• Income accruing to a trustee of any trust or settlement, or estate or to the executor of any estate of a deceased person.
• Any other gain, income or profit not falling within the preceding categories.

Resident and Non-Resident Individual

A resident individual is defined by the Act as one who is resident in Nigeria and whose duties of employment are wholly or partly performed in Nigeria.

Read more on Resident and non-Resident Individual

Benefits in Kind, S14

Benefit in kind refers to expenses incurred by an employer in the provision of benefits to an employee. These benefits often include provision of official car for private purpose, provision of cooks/gardeners, provision of furnished living accommodation etc. Benefits provided to the spouse, dependants and other household of the employee are also categorized as Benefits-in-kind. These are regarded as part of the taxable income of the employee, where they relate to services rendered by such employee.

See complete list of benefits-in-kind

Ascertainment of Chargeable Income of Individuals, S30

the chargeable income of an individual is the total income of the individual less eligible deductions as ascertained under section 28 of the Act.

 Eligible deductions include
a. payments made by an individual in an assessment year, in respect of the contributions of the individual under:
– the National Health Insurance Scheme
– the Pension Reform Act
– the National Housing Fund
– loan interest for developing an owner-occupied residential house
– rent relief of 20% of annual rent paid, subject to a maximum of N500,000, whichever is lower, the individual is expected to accurately declare the actual amount of rent paid in addition to other relevant information as may be requested by the relevant tax authority
– Premium or annuity paid annually by an individual in the year preceding the year of assessment with respect to life insurance for the individual or his spouse, or a contract for a deferred annuity on his own life or the life of his spouse

In accordance with S31 of the Act, for any year of assessment, deductions shall only be allowed when claimed in writing in such form as may be prescribed by the relevant tax authority. Under section 30 (2) (a) of the Act, a claimant may be required to produce the documentary evidence to support any claim. In the absence of adequate evidence, the tax authorities may refuse to grant such deduction or part of the amount claimed.

Personal Injury, S50

1. Chargeable gains shall not arise for compensations of up to N50,000,000 in respect of injury suffered by an individual, wrongs or damages in his profession or vocation, as well as compensations for loss of employment or office, injury or wrong for libel or slander
2. Any amount in excess of N50,000,000, shall constitute a chargeable gain.
3. In respect of subsection 1 and 2, It is required that at the point of payment for compensation to an individual, the person paying compensation is to deduct and remit the tax due to the relevant tax authority.
4. The deducted tax is to be remitted within the specified time under the Pay-As-You-Earn or the Deduction of Tax at Source Regulations issued pursuant to the Nigeria Tax Administration Act, 2025.

Principal Private Residences, S51

1. The disposal of, or interest in a dwelling-house or part of a dwelling-house as well as land immediately adjoining the dwelling house up to a maximum of one acre, other than land used for commercial purposes are exempt from tax.
2. Under this section, the exemption shall be enjoyed only once, in the lifetime of the individual
3. where a person disposes of only a part of a dwelling-house or a house used partly as dwelling place and partly for carrying out a business, the consideration shall be apportioned.

Personal Chattels – S52

1. if the total amount or value of the consideration for the disposal of personal chattels being tangible movable property of an individual does not exceed N5,000,000 or three times the annual national minimum wage (whichever is higher), any gain accruing therefrom shall not be a chargeable gain.
2. In the event of the disposal of two or more assets by a person to the same person or connected persons, whether on the same or on different occasions, the two or more transactions shall be treated as a single transaction disposing of a single asset, but with any apportionments, where necessary.

The disposal of currency is not applicable to this section.

PAYE Tax Rate in Nigeria

ANNUAL P.A.Y.E TAX ASSESSMENT FORMAT
	N
Gross Income (A)	XX
Less: Reliefs & Allowances
Rent Relief (20% of annual rent – max N500,000)	X
Pension Contributions (8% of basic, transport & housing)	X
NHF (2.5% of one-month basic salary)	X
NHIS Premium	X
Interest on loan (Owner occupied property)	X
Life Assurance Premium	X
Total Allowable Deductions (B)	(XX)
Taxable Income C = A – B	XX
Applicable Tax Table (from 1 January 2026)
First N800,000 @0%	X
Next N2,200,000 @15%	X
Next N9,000,000 @18%	X
Next N13,000,000 @21%	X
Next N25,000,000 @23%	X
Above N50,000,000 @25%	X
PAYE (Tax Payable) D	XX

PAYE Calculation

Assumptions
		N
Annual gross income (A)		12,000,000
Total Allowance (B)		1,088,000
Taxable Income (A – B)		10,912,000
Applicable Tax
First N800,000 @0%	800,000 * 0%	–
Next N2,200,000 @15%	2,200,000 *15%	330,000
Next N9,000,000 @18%	7,912,000 *18%	1,424,160
Annual PAYE (C)		1,754,160

See more posts:

• The Nigeria Tax Reform Act 2025 – Top 18 Things to Know
• Resident and non-resident individual
• Chargeable income and Benefit-in-kind