If your January 2026 payslip looked different from December 2025, the old vs new PAYE Nigeria comparison explains why. The Nigeria Tax Act 2025 took effect on 1 January 2026 and repealed the Personal Income Tax Act outright, according to TopSource. PAYE moved from the old 7%–24% bands to a 0%–25% six-band structure, the Consolidated Relief Allowance (CRA) was abolished, and a rent relief that requires proof of rent payment took its place. Any payroll still computing tax on the 2025 template is now applying a repealed law. This guide sets the two regimes side by side, works through the numbers, and shows what employees and employers must fix.
What Actually Changed on 1 January 2026
Three changes matter most. First, the legal basis shifted: the Nigeria Tax Act 2025 and the Nigeria Tax Administration Act 2025 were signed on 26 June 2025 and commenced on 1 January 2026, and the commencement date was not deferred, according to TopSource. The Federal Inland Revenue Service also became the Nigeria Revenue Service (NRS) under the Nigeria Revenue Service (Establishment) Act.
Second, the rate schedule changed. PAYE now runs on a progressive six-band structure from 0% to 25%, replacing the old 7% to 24% bands, according to DLA Piper Africa (Olajide Oyewole LLP).
Third, the relief structure changed. The CRA is gone, replaced by a rent relief that requires evidence of rent payment. Gratuity and other items are also newly regulated. The practical effect, as DLA Piper puts it, is that payroll systems still using the old bands are producing incorrect deductions.
Old PAYE vs New PAYE: Side-by-Side Comparison
| Feature | Old regime (to 31 December 2025) | New regime (from 1 January 2026) |
|---|---|---|
| Governing law | Personal Income Tax Act | Nigeria Tax Act 2025 (PITA repealed) |
| Rate bands | 7% to 24% | 0% to 25%, six bands |
| Main relief | Consolidated Relief Allowance | Rent relief, with proof of rent |
| Tax-free floor | Low, through CRA and band structure | Higher, through a 0% first band |
| Evidence needed | None for CRA | Rent documentation for rent relief |
| Collecting authority | FIRS (now NRS) | Nigeria Revenue Service |
What each structure does to low, middle and high earners
Low earners gain the most. A 0% first band plus a higher tax-free floor means many minimum-wage and junior workers pay little or nothing, where the old CRA-plus-7% structure still took a slice. Middle earners see a mixed result: the wider zero band helps, but losing CRA hurts anyone who cannot document rent. High earners face a 25% top rate, slightly above the old 24%, though the graduated steps soften the climb.
Why a 2025 payroll template now produces wrong deductions
Most payroll software stores tax as a formula: subtract CRA, then apply band rates. Both halves of that formula are now wrong. The CRA line must be removed, the rent relief added with its evidence requirement, and the band table replaced. A template that still deducts CRA will under-deduct tax for employees without rent proof and over-relieve those who never qualified. Either way, the remittance to the NRS will not match the law.
The New PAYE Bands and Tax-Free Threshold Explained
The new schedule applies six progressive rates to annual taxable income after reliefs. The first band is taxed at 0%, so a slice of income is entirely tax-free; the remaining bands step up to a 25% top rate. The exact naira thresholds are set in the Act and should be confirmed against the NRS’s published table before you configure payroll, because secondary summaries vary in how they present the cut-offs.
Two points are settled. The structure is progressive, so each band applies only to the income falling inside it, not to the whole salary. And the bands apply to taxable income, meaning gross pay less pension, NHF and other allowable deductions and reliefs, not to gross salary.
Who benefits most from the higher tax-free floor
Workers on modest salaries benefit most, because the 0% band absorbs a larger share of their income. An employee earning around ₦400,000 a month, the example used in SeamlessHR’s 2026 payroll guide, sits in the range where the new floor and bands make a visible difference to take-home pay.
CRA Out, Rent Relief In: What You Must Show
Under the old law, the CRA was calculated automatically from gross income, with no receipts required. Every employee got it, whether they rented a mansion in Lekki or lived in a family house in Aba.
The rent relief works differently. It is claimed against actual rent paid, and it requires proof. In practice, that means a tenancy agreement and evidence of payment, such as receipts or bank transfers to the landlord, plus the landlord’s details. Employers should collect these documents during annual tax filing and keep them on file, because the relief is only as good as the paper behind it.
The consequence is blunt: an employee who rents but cannot show documentation loses the relief and pays more tax than a colleague on the same salary with proper receipts. Landlords who issue informal handwritten notes or refuse receipts are costing their tenants money.
Worked Example: Take-Home Pay Under Both Regimes
Take a employee on ₦400,000 a month, or ₦4,800,000 a year. Pension at 8% of basic (assuming basic equals gross for simplicity) is ₦384,000 a year, and NHF at 2.5% is ₦120,000, leaving roughly ₦4,296,000 before tax reliefs.
Under the old regime, CRA plus the 7%–24% bands would have produced a monthly PAYE deduction in the tens of thousands of naira. Under the new regime, the 0% first band and the rent relief (where documented) reduce the annual taxable income further before the 0%–25% bands apply. The precise naira figure depends on the exact band thresholds and the rent relief cap, so run the numbers through the NRS table rather than relying on a rule of thumb.
Where the difference lands: for a low earner with documented rent, take-home pay rises. For a middle earner without rent proof, the gain from the wider zero band may be partly or wholly offset by the loss of CRA. For a high earner, the 25% top rate trims the benefit of the zero band. Pension and NHF are unaffected by the PAYE change: they remain statutory deductions calculated on the same bases, and they still reduce taxable income before PAYE is applied.
What Employers and Payroll Teams Must Fix Now
- Reconfigure payroll software. Delete the CRA formula, load the six new bands, and add a rent relief field that only activates when documentation is on file.
- Update employee records. Request tenancy agreements, rent receipts and landlord details from every employee claiming rent relief, and set a deadline before the next pay run.
- Reconcile the first 2026 payroll. Compare what was deducted in January and February against a manual calculation under the new table. If you carried over the 2025 configuration, correct it and regularise the difference.
- Remit correctly. PAYE is remitted to the Nigeria Revenue Service. Late or incorrect remittance attracts penalties under the Nigeria Tax Administration Act 2025, and the employer, not the employee, carries the liability.
- Document gratuity and terminal benefits. These are among the newly regulated items, so payroll should treat them deliberately rather than by habit.
Common Mistakes and Misunderstandings
- Assuming the change was deferred. It was not. The Acts commenced on 1 January 2026 as printed, according to TopSource.
- Applying CRA out of habit. The allowance no longer exists; a payslip showing “CRA” in 2026 is a red flag.
- Claiming rent relief without evidence. The relief is proof-based. An unsupported claim is a compliance risk for employer and employee alike.
- Ignoring gratuity and other newly regulated items. These now sit inside a clearer statutory framework and should not be handled informally.
- Using a single online calculator without checking the law. Many still run the old 7%–24% logic.
What This Means for You
Employees
Check your payslip against the new table. Confirm there is no CRA line, that the 0% band has been applied, and that any rent relief reflects documents you actually submitted. If you rent, get a written tenancy agreement and receipts now, not at year-end.
Employers
Audit your payroll before the next pay run. Test three salaries (low, middle, high), confirm the rent relief register is complete, and check that remittances to the NRS match the new computation. Where the figures are uncertain, confirm the band thresholds with the NRS or a tax adviser rather than guessing.
Conclusion
The old vs new PAYE Nigeria comparison comes down to three shifts: a 0%–25% six-band schedule, the end of CRA, and a rent relief that must be proved. Low earners benefit most, middle earners need documentation to keep their gains, and employers must reconfigure payroll now or carry the penalty. The law changed on 1 January 2026; the only question is whether your payroll has caught up.
Frequently Asked Questions
How much tax will I pay under the new PAYE regime in Nigeria?
It depends on your annual taxable income after pension, NHF and reliefs. The first band is taxed at 0% and the top band at 25%, so the rate rises in steps. Confirm the exact naira thresholds on the NRS table before calculating.
Is the Consolidated Relief Allowance still available in 2026?
No. The Nigeria Tax Act 2025 abolished the CRA and replaced it with a rent relief that requires proof of rent payment, according to DLA Piper Africa.
How do I claim rent relief under the new tax law?
Provide your employer with a tenancy agreement and evidence of rent paid, such as receipts or bank transfers, plus your landlord’s details. The relief is applied against documented rent only.
Will my take-home pay increase or reduce under the new PAYE bands?
Low earners with documented rent generally take home more. Middle earners without rent proof may see little change or a reduction, since the CRA is gone. High earners face a slightly higher top rate of 25%.
What happens if my employer’s payroll still uses the old PAYE table?
Deductions will be wrong and remittances will not match the law. The employer carries the liability for under-remittance and penalties, so raise it with payroll and ask for a corrected computation.
Sources and further reading
- Payroll taxes and employer liability: Closing the compliance gap under Nigeria's new tax regime
- Payroll taxes and employer liability: Closing the compliance gap under Nigeria's new tax regime – Register now for your free, tailored, daily legal newsfeed ser
- FAQs On Payroll Taxes and Employer Liability: Closing the Compliance Gap Under Nigeria's New Tax Regime | DLA Piper Africa, Nigeria | Olajide Oyewole LLP
- Payroll Services & Outsourcing in Nigeria | TopSource
- Nigeria's 2026 Tax Reform: A Payroll Guide for Employers
