PAYE as Stated in the Nigeria Tax Administration Act 2025 (NTAA 2025): A Practical Guide for Employers and Employees

The Nigeria Tax Act 2025, which took effect on January 1, 2026, consolidated and modernized Nigeria's tax laws. One of the most visible changes for workers and businesses is the new PAYE framework. PAYE – Pay-As-You-Earn – remains the system where income tax is deducted at source from salaries and wages.

Here is what NTAA 2025/NTA 2025 says, in plain terms:

1. Who is to Pay?

Under NTAA 2025, PAYE is the responsibility of employers, but the burden falls on employees.

• Employers: Every employer in Nigeria must deduct PAYE from employees' salaries before payment and remit it to the relevant tax authority. This includes private companies, government MDAs, NGOs, and anyone paying emoluments.
• Employees: All individuals in paid employment whose annual income exceeds the tax-free threshold are liable.
• Self-employed / Gig workers: Those not under formal employment must self-assess and pay directly through Direct Assessment. NTAA 2025 also taxes the worldwide income of Nigerian residents.
• Exemptions: A large majority of low-income earners are now exempt. The first ₦800,000 of annual income is fully tax-free. This means workers earning ₦66,667 per month or less pay no PAYE. Pension contributions, NHF, NHIS, and documented rent relief are also deducted before tax.

2. What Percentage is to be Paid?

NTAA 2025 replaced the old flat CRA system with progressive bands. Tax is calculated on chargeable income after allowable deductions.

The 2025 bands for annual income are:

How it works: You first deduct allowable items — employee pension 8%, NHF 2.5%, rent relief of 20% of rent paid capped at ₦500,000, life insurance, etc. Then apply the rates above to the balance.

Example: If your chargeable income is ₦15,000,000, tax = ₦0 on first ₦800k + 15% on next ₦2.2m + 18% on next ₦9m + 21% on balance ₦3m = ₦2,580,000 annually.

3. How is it to be Paid?

• Deduction at source: Employers must calculate PAYE monthly after deducting statutory reliefs, then deduct from net salary.
• Remittance: Deducted PAYE must be remitted to the Nigeria Revenue Service / State Internal Revenue Service.
• Returns:
  1. Monthly remittance: See timing below
  2. Annual PAYE return: Employers must file a return for all employees by January 31 of each year.
  3. Individuals are also expected to file annual personal income tax returns for all sources of income.

4. What Time of the Month Should it be Paid?

NTAA 2025 sets a clear deadline to remove ambiguity.

• Monthly PAYE remittance is due on or before the 10th day of the month following the deduction. Example: January 2026 salary deductions are due February 10, 2026. December 2025 deductions were due January 10, 2026.
• Annual return deadline: January 31 each year.

5. What are the Implications of Not Paying?

The new regime comes with stiffer enforcement.

• Late remittance by employer: 10% penalty on the amount not remitted, plus interest at the Monetary Policy Rate (MPR).
• Failure to deduct at all: 40% administrative penalty on the amount not deducted.
• Late filing of annual PAYE return: ₦100,000 penalty in the first month of default, and ₦50,000 for each subsequent month.
• General non-compliance: Tax authorities may issue a "best-of-judgment" assessment where returns are not filed. Other administrative fines of ₦100,000 first month + ₦50,000 thereafter apply for failure to file required returns.

Key Takeaways for 2026

1. More take-home for low and middle earners: With ₦800k tax-free and new bands, over 65% of workers paid less tax in January 2026.
2. Documentation matters: Rent relief and other deductions only apply with proof.
3. Compliance is non-negotiable: The 10th-day rule and penalties are designed for revenue certainty.

PAYE under NTAA 2025 is simpler for low earners but stricter for employers. If you are an employer, update your payroll to reflect the new bands and the 10th-day remittance. If you are an employee, check your payslip to ensure only chargeable income after reliefs is being taxed.