Understanding Nigeria's NTA-2025: what payroll teams must change now

The Nigeria Tax Act 2025 (NTA-2025) has applied to employment income since 1 January 2026. Most payroll teams changed their tax bands in January. Fewer went back to check the inputs behind those bands: the relief each employee claims, the base each deduction is charged on, and how one-off payments such as gratuity are taxed. This post is a working list of what to change and what to check, in the order a payroll team meets it.

Start with the bands

PAYE is still worked out on annual taxable income, then spread across the pay periods. The annual bands under NTA-2025 are:

• 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%

Check that your tax table carries these bands with an effective date of 1 January 2026, and that the months of 2025 still use the old table. If the old bands were overwritten instead of kept as an earlier version, any rerun or correction of a 2025 period will now be taxed on the wrong rules.

Remove the CRA and capture rent

The Consolidated Relief Allowance has gone. The relief that replaces it is narrower: 20% of the annual rent an employee actually pays, capped at ₦500,000 a year. That makes rent an input you now need from each employee, and one you may need evidence for. An employee who pays no rent, or who has not told you what they pay, gets no rent relief.

• Ask staff to declare their annual rent, and keep the tenancy evidence your policy requires
• Record the declared rent on the employee's record, so it reduces taxable income rather than appearing as pay
• Review declarations once a year, and whenever someone moves

For many middle earners, losing the CRA and gaining only rent relief changes take-home pay. Expect questions, and be ready to show the working on the payslip.

Check the base for each contribution

The eligible deductions that come off income before PAYE are pension, NHF, NHIS, interest on a mortgage for a home the employee lives in, life insurance premiums, and rent relief. Each statutory contribution has its own base, and a wrong base is the most common reason a payslip does not reconcile.

• Pension: 8% from the employee and 10% from the employer, on Basic + Housing + Transport
• NHF: 2.5% of basic salary
• NHIS: charged on basic salary, where your scheme applies

If your system defines each base as a formula, check the formula as well as the rate. A pension rate of 8% applied to gross instead of to Basic + Housing + Transport overstates the deduction for everyone who has other allowances.

Benefits-in-kind

When you give an employee the use of an asset, such as a car or equipment, a taxable value is added to their income. A common basis is 5% of the asset's cost each year, and it is the basis Vintage People uses when you record a benefit-in-kind against an employee. The value raises taxable income without being paid in cash, so it shows on the payslip as a tax line, not as earnings. Accommodation and other benefits follow their own rules. Confirm the treatment of anything unusual with your tax adviser before you set it up.

Gratuity and exit pay

Compensation for loss of employment is exempt up to ₦50 million. Only the amount above that is taxed. Gratuity is a separate item, and whether it is taxable depends on how your scheme is set up and paid. Agree the treatment with your adviser, write it into your policy, and apply it the same way for every leaver.

In Vintage People the leaver is paid in the normal run for their last period. Leave encashment, gratuity and compensation are added as once-off earnings, each taxed or exempt according to your settings, and compensation is split into its exempt and taxable parts. The final PAYE is worked out from the year to date, so the leaver's tax for the year is settled in that run.

Exemptions and contractors

Employees on the national minimum wage are exempt from PAYE. Make sure the threshold in your payroll policy matches the current minimum wage, so those staff are not taxed by mistake. Independent contractors are not on PAYE at all. They are subject to withholding tax, usually at 5%, which you deduct and remit separately.

Most NTA-2025 errors are not in the bands. They are in the inputs: a missing rent declaration, a pension base set to gross, a gratuity taxed one way for one leaver and another way for the next.

A checklist for the next run

• Tax bands effective from 1 January 2026, with the 2025 table kept for history
• The CRA removed everywhere, including any custom formula
• Rent declarations captured for every employee who claims the relief
• Pension on Basic + Housing + Transport, NHF on basic salary
• Benefits-in-kind recorded with the asset's cost
• Gratuity and compensation treatment written down and set
• The minimum-wage threshold current
• Contractors on withholding tax, not PAYE
• A variance report against last month, with every change explained

You can check a single salary against these rules with our free PAYE calculator. For the full arithmetic with worked numbers, read our complete PAYE guide for Nigerian employers.