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PAYE / Payroll Tax
NRS / State IRS
Updated 2025
PAYE Tax Guide for Nigerian Employers (2025)
Everything Nigerian employers need to know about Pay As You Earn (PAYE) — from registration with state revenue services to calculating deductions, meeting the 10th-of-month deadline, and avoiding costly penalties.
PAYE Tax Bands (After CRA)
After applying the Consolidated Relief Allowance (₦200,000 or 20% of gross — whichever is higher), taxable income is taxed progressively:
Annual Taxable Income
Tax Rate
Max Tax This Band
First ₦300,000
7%
₦21,000
Next ₦300,000
11%
₦33,000
Next ₦500,000
15%
₦75,000
Next ₦500,000
19%
₦95,000
Next ₦1,600,000
21%
₦336,000
Above ₦3,200,000
24%
—
Source: Personal Income Tax Act (PITA) as amended by Finance Acts 2019–2023.
Key PAYE Obligations at a Glance
📅
Remittance Deadline
10th of following month
📄
Annual Return Deadline
31 January (prior year)
⚠️
Late Remittance Penalty
10% of amount + interest
🏦
Pension (Employer)
10% of monthly emoluments
💼
Pension (Employee)
8% of monthly emoluments
🛡️
NSITF (Employer only)
1% of total monthly payroll
Monthly PAYE Payroll Process
To register for PAYE, you first need a CAC-registered business and a TIN. If you haven't incorporated yet, our CAC business registration guide walks you through the process — CAC now auto-assigns a TIN on registration, which you'll need for step 1 below.
1
Collect employee relief claims
At start of employment and annually each January, collect Form A from employees to note pension contributions, NHF, life assurance premiums, and other deductibles.
2
Calculate gross pay
Sum all salary components: basic salary, housing allowance, transport, leave allowance, medical, and any taxable bonuses.
3
Apply statutory deductions
Deduct employee pension (8%), NHIA (5%), and NHF (2.5% of basic) from gross to arrive at 'gross for tax purposes'.
4
Apply CRA
Deduct Consolidated Relief Allowance: ₦200,000 or 20% of gross income (after pension/NHIA/NHF), whichever is higher.
5
Apply progressive tax table
Tax the remaining income using the progressive bands. This is the PAYE deduction amount.
6
Remit by 10th of next month
Pay all PAYE deductions plus employer contributions (pension, NSITF) to the relevant state IRS and PFA by the 10th.
Frequently Asked Questions
Answers for Nigerian business owners navigating PAYE obligations
Consequences of PAYE non-compliance are severe: (1) Penalty of 10% of the unremitted amount per month plus interest at the prevailing CBN rate, (2) Directors of defaulting companies can be held personally liable under PITA, (3) State IRS can issue a 'distress warrant' to seize and sell company assets to recover unpaid PAYE, (4) NRS (for Abuja) and state IRS can freeze company bank accounts, (5) The company may be unable to obtain Tax Clearance Certificates (TCC) needed for government contracts and imports. PAYE is often the first thing checked in a tax audit.
PAYE applies to all employees — full-time, part-time, and casual workers. For independent contractors (who are not employees), the applicable tax is Withholding Tax (WHT) deducted at 5% by the payer, not PAYE. The key distinction: if you control how, when, and where the work is done, it's employment (PAYE applies). If the person supplies a service at their own discretion, it's contracting (WHT applies). Misclassifying employees as contractors to avoid PAYE is illegal and is a common target of NRS and state IRS audits.
Staff costs and tax deductions: Salary expenses, pension contributions, and NSITF payments are all tax-deductible business costs. Our expense tracking guide for Nigerian SMEs explains how to record and categorise staff costs so they survive an NRS audit. When billing clients for services where your staff time is a cost, remember that Withholding Tax (WHT) deducted on your invoices can offset your overall tax liability — see our invoicing guide for how to handle WHT on Nigerian invoices correctly.
Automate payroll & PAYE compliance
Kontrol by JusticeSure calculates PAYE automatically for every employee, generates payslips, and reminds you of the 10th-day remittance deadline every month.
Pay As You Earn (PAYE) is a system under the Personal Income Tax Act (PITA) Cap P8, LFN 2004 (as amended) requiring employers to deduct income tax from employees' salaries monthly and remit it to the relevant state's Internal Revenue Service (IRS). Every employer with staff — whether incorporated or not — must register for PAYE with the state IRS where their employees reside. The Nigerian Revenue Service (NRS, formerly NRS) administers PAYE for FCT (Abuja), while state IRS handles all other states. There is no minimum employee threshold — even hiring one person triggers PAYE obligations.
What are the PAYE tax rates in Nigeria (2025)?
Nigeria uses a progressive PAYE tax table. Annual consolidated relief allowance (CRA) is ₦200,000 + 20% of gross income (whichever is higher). After deducting CRA, the remaining taxable income is taxed: First ₦300,000 — 7%; Next ₦300,000 — 11%; Next ₦500,000 — 15%; Next ₦500,000 — 19%; Next ₦1,600,000 — 21%; Above ₦3,200,000 — 24%. Note: Minimum tax applies where an employee's annual income exceeds the CRA — the minimum tax payable is 1% of gross income if the regular tax calculation yields less. The Finance Acts of 2019–2023 have updated various thresholds.
When must PAYE be remitted in Nigeria?
Under the Personal Income Tax Act, PAYE deductions must be remitted to the relevant state IRS by the 10th day of the month following the deduction. For example, January salaries deducted must be remitted by 10 February. Additionally, employers must file monthly PAYE returns showing all employees, their gross salaries, deductions, and net payments. An annual tax return (Form IT01) must be submitted by 31 January of the following year showing the full year's PAYE data. Failure to remit on time attracts penalties of 10% of the tax due plus interest.
How does an employer register for PAYE with the state IRS?
To register for PAYE: (1) Obtain your company's TIN from NRS/JTB, (2) Visit the state IRS office for each state where employees are resident (not where the office is located — PAYE follows employee residence), (3) Submit: CAC Certificate, TIN certificate, list of employees with their names, addresses, and BVN/NIN, (4) Complete the employer registration form, (5) Receive your employer PAYE file number. Some states (Lagos, Rivers, Kano, Abuja) have online portals. In Lagos, register via the LIRS portal (lirs.gov.ng). In Abuja/FCT, register with NRS directly.
What are the other statutory deductions alongside PAYE?
Nigerian employers must also handle: (1) Pension — under the Pension Reform Act 2014, both employer (10% of monthly emoluments) and employee (8%) contribute to a Pension Fund Administrator (PFA). Mandatory for companies with 3+ employees, (2) NHIS/NHIA — National Health Insurance Authority: 10% employer + 5% employee contribution for formal sector, (3) NSITF — Nigeria Social Insurance Trust Fund: 1% of total monthly payroll by employer only. Registration with each body is separate. Kontrol's HR module automates all these statutory deductions alongside PAYE.
What tax reliefs can reduce an employee's PAYE in Nigeria?
Under PITA, employees can claim: (1) Consolidated Relief Allowance (CRA) — ₦200,000 or 20% of gross income, (2) Pension contribution — 8% of basic salary (employee contribution is tax-deductible), (3) NHF contribution — National Housing Fund at 2.5% of basic salary, (4) Life assurance premium on own life or spouse, (5) NHIA contribution. For self-employed individuals, business expenses are deductible. Employers should collect relief claims from employees on Form A before computing PAYE to ensure accurate deductions.
What happens if an employer fails to remit PAYE?
Consequences of PAYE non-compliance are severe: (1) Penalty of 10% of the unremitted amount per month plus interest at the prevailing CBN rate, (2) Directors of defaulting companies can be held personally liable under PITA, (3) State IRS can issue a 'distress warrant' to seize and sell company assets to recover unpaid PAYE, (4) NRS (for Abuja) and state IRS can freeze company bank accounts, (5) The company may be unable to obtain Tax Clearance Certificates (TCC) needed for government contracts and imports. PAYE is often the first thing checked in a tax audit.
Does PAYE apply to part-time workers and contractors?
PAYE applies to all employees — full-time, part-time, and casual workers. For independent contractors (who are not employees), the applicable tax is Withholding Tax (WHT) deducted at 5% by the payer, not PAYE. The key distinction: if you control how, when, and where the work is done, it's employment (PAYE applies). If the person supplies a service at their own discretion, it's contracting (WHT applies). Misclassifying employees as contractors to avoid PAYE is illegal and is a common target of NRS and state IRS audits.