Prior to the 2025 reform, Nigerian employees deducted a Consolidated Relief Allowance (CRA) equal to the higher of ₦200,000 or 1% of gross, plus 20% of gross income. Under the Nigeria Tax Act 2025 (effective January 1, 2026), the CRA is eliminated. In its place, the tax schedule introduces a 0% tax-exempt band on the first ₦800,000 of annual taxable earnings (₦66,666.67/month), protecting low earners from tax liability without complex relief calculations.
Complete Guide to Nigerian PAYE, Pension, and Tax Act 2025 Reform
In Nigeria, employee payroll is governed by federal legislation administered by State Internal Revenue Services (such as LIRS in Lagos) and the Federal Inland Revenue Service (FIRS). The landmark Nigeria Tax Act 2025 overhauled personal taxation, abolishing the Consolidated Relief Allowance (CRA) in favor of a ₦800,000 tax-free personal band and revised progressive brackets, while maintaining mandatory retirement savings under the Pension Reform Act (PRA) 2014.
Nigeria Tax Act 2025 vs. PITA CRA Reform
Progressive Tax Rates Under Nigeria Tax Act 2025
Annual taxable income above ₦800,000 is taxed in progressive brackets: ₦800,001 to ₦3,000,000 at 15%; ₦3,000,001 to ₦12,000,000 at 18%; ₦12,000,001 to ₦25,000,000 at 21%; ₦25,000,001 to ₦50,000,000 at 23%; and taxable income exceeding ₦50,000,000 at 25%. Historical calculations under the PITA 6-bracket schedule (7% to 24%) remain fully accessible for past tax periods.
Rent Relief Deduction
The Nigeria Tax Act 2025 introduced an allowable deduction for personal rent paid. Employees who submit valid tenancy documentation can deduct actual rent paid, capped at the lower of ₦500,000 per annum (₦41,666.67 per month) or 20% of their actual annual rent, directly reducing chargeable income.
Mandatory Pension Reform Act (PRA) 2014
Under the Pension Reform Act 2014, employers and employees must contribute to a Retirement Savings Account (RSA). The employee contributes a mandatory minimum of 8%, while the employer contributes at least 10%. Contributions are calculated on pensionable emoluments, defined as the sum of Basic Salary, Housing Allowance, and Transport Allowance.