The Nigeria Tax Act 2025, explained for employers.

1. What the Nigeria Tax Act 2025 is

The Nigeria Tax Act 2025 (NTA 2025) is one of four tax reform laws signed by President Bola Tinubu in June 2025, alongside the Nigeria Tax Administration Act, the Nigeria Revenue Service (Establishment) Act, and the Joint Revenue Board (Establishment) Act. Together they replace a patchwork of older tax laws, including the Personal Income Tax Act, with a single, consolidated tax code.

For employers, the part that matters most day to day is Pay As You Earn (PAYE), the tax you deduct from employee salaries and remit to the relevant tax authority every month. NTA 2025 changes how that deduction is calculated.

2. When it takes effect

NTA 2025 applies from 1 January 2026. Payroll runs for periods before that date follow the old Personal Income Tax Act rules and rates. Any payroll you run for January 2026 onward should use the new PAYE bands and reliefs described below.

3. The new PAYE bands

NTA 2025 replaces the old Personal Income Tax Act bands with a simpler, more progressive table. Annual chargeable income is taxed as follows:

The practical effect is that most minimum wage and low-income earners now fall entirely below the tax-free threshold, while the top marginal rate for high earners rises to 25%.

4. Rent relief replaces the old CRA

The previous Consolidated Relief Allowance (CRA), a flat deduction of 20% of gross income plus a fixed amount, is gone. In its place, NTA 2025 introduces a rent relief: employees can deduct 20% of the annual rent they pay, capped at ₦500,000, from their chargeable income before tax is calculated.

This means the tax an employee owes now depends in part on how much rent they declare, not just their salary. Employers do not need to verify rent receipts themselves, but should be prepared for employees to ask how this affects their payslip.

5. FIRS becomes the Nigeria Revenue Service

The Federal Inland Revenue Service (FIRS) has been restructured into the Nigeria Revenue Service (NRS) under the Nigeria Revenue Service (Establishment) Act 2025. The NRS takes over federal tax administration, including PAYE oversight at the federal level, while State Internal Revenue Services continue to administer PAYE collection for their states, since PAYE remains a state-collected tax on individuals.

6. What stays the same

• PAYE is still calculated on income after statutory deductions such as pension and, where applicable, NHF contributions are taken out.
• Employers are still responsible for deducting PAYE at source and remitting it monthly to the State Internal Revenue Service where each employee is resident.
• Employers still issue annual tax deduction statements to employees and file annual PAYE returns.
• Withholding tax (WHT) on payments to contractors and vendors continues to apply, now administered under the consolidated Act.

7. Remittance and penalties

PAYE deducted from a month's payroll is due to the relevant State Internal Revenue Service by the 10th day of the following month, as under the previous law. Late or short remittance attracts interest and penalties set by the state tax authority, and can result in a compliance audit.

8. How Wadata HR keeps you compliant

Wadata HR's payroll engine applies the NTA 2025 PAYE bands and rent relief automatically to every payroll run from 1 January 2026 onward. Tax rates live in a compliance rules table, not hardcoded in the software, so when the Nigeria Revenue Service or a State IRS updates guidance, we update the rules and every subsequent payroll run reflects the change.

Every payslip shows a full statutory breakdown, and every payroll run generates a PAYE remittance schedule formatted for your State Internal Revenue Service, ready to file.