With the implementation of Nigeria’s restructured tax framework under the Nigeria Tax Act 2025, PAYE reliefs have become one of the most critical determinants of how much personal income tax employees and employers ultimately pay from 2026 onward.

Yet, many Nigerian businesses and employees still:

• Misapply reliefs
• Ignore allowable deductions
• Overpay PAYE unnecessarily
• Expose themselves to compliance risks

This comprehensive guide explains Nigeria PAYE reliefs in 2026, covering rent relief, pension contributions, NHF deductions, and other allowable allowances, with clear explanations and practical guidance for proper application.

What Are PAYE Reliefs in Nigeria?

PAYE reliefs are statutorily approved deductions that reduce an employee’s chargeable income before PAYE tax rates are applied.

When reliefs are correctly applied, employees pay less tax, and employers avoid under- or over-remittance issues.

These reliefs are grounded in law, not discretion. Their legal basis is explained in detail in our comprehensive guide: Nigeria Tax Act 2025 – A Complete Guide to the New Tax Revolution

Approved PAYE Reliefs in Nigeria (2026)

Below are the key PAYE reliefs applicable under the Nigeria Tax Act 2025 framework:

1. Pension Contribution Relief

Employee pension contributions made under the Contributory Pension Scheme (CPS) are fully deductible for PAYE purposes.

Key points:

• Calculated at 8% of monthly emoluments (basic, housing, transport)
• Automatically reduces chargeable income
• Applies monthly and annually
• Must be remitted to approved Pension Fund Administrators (PFAs)

Common Pension Mistakes

• Excluding pension from PAYE computation
• Applying incorrect contribution percentages
• Manual payroll miscalculations
• Using incorrect qualifying emoluments base

2. National Housing Fund (NHF) Relief

NHF contributions (2.5% of basic salary) remain an allowable PAYE deduction where applicable.

Important considerations:

• Applies to employees earning ₦3,000 and above monthly
• Contributions must be properly recorded and remitted
• Incorrect NHF handling often inflates PAYE deductions
• Voluntary for some categories of workers

3. National Health Insurance Scheme (NHIS)

Employee contributions to NHIS are deductible where the scheme is operational and contributions are properly documented.

4. Life Assurance Premium Relief

Premiums paid on life assurance policies may qualify as a relief, subject to:

• The policy being on the employee’s life or their spouse
• Proper documentation and evidence of payment
• Compliance with relevant insurance regulations

Rent Relief Under Nigeria PAYE (2026)

Rent relief is one of the most misunderstood and misapplied PAYE reliefs.

Key Clarifications

• Rent relief is not automatic
• It applies only when employers do not provide accommodation
• Employees must provide evidence of rent payments
• Proper declarations and documentation are essential
• The relief is capped and subject to conditions

PAYE Reliefs Calculation Example (2026)

How PAYE Reliefs Fit into PAYE Computation

Reliefs must always be applied before PAYE tax rates. The correct computation flow is:

1. Calculate Gross Income (all taxable emoluments)
2. Deduct Pension Contributions
3. Deduct NHF Contributions
4. Deduct NHIS Contributions (where applicable)
5. Apply Life Assurance Premium Relief (if documented)
6. Apply Other Allowable Reliefs
7. Determine Chargeable Income
8. Apply Progressive Tax Rates (New 2026 Bands)
9. Calculate Final PAYE Tax

If you need a detailed breakdown of the computation process, read our step-by-step guide: How to Calculate Nigeria PAYE 2026

Common PAYE Relief Mistakes in Nigeria

Many PAYE compliance issues arise from the following errors:

1. Claiming non-allowable expenses as PAYE reliefs
2. Poor pension and NHF tracking across payroll periods
3. Inconsistent payroll records and documentation
4. Manual salary computation leading to calculation errors
5. Outdated tax configurations not aligned with 2026 laws (e.g., still using CRA)
6. Incorrect relief calculations under the new framework
7. Failure to update employee relief data
8. Missing documentation for claimed reliefs

These errors can lead to:

• PAYE under-remittance and penalties
• Interest charges on late payments
• Payroll disputes with employees
• Regulatory audits and assessments
• Reputational damage

How Accounting Software Ensures Accurate PAYE Reliefs

With Nigeria’s evolving tax environment, manual payroll systems are no longer sustainable.

Modern accounting and payroll software help by:

• Automating pension and NHF deductions
• Applying PAYE reliefs correctly and consistently
• Aligning payroll with current tax laws
• Generating audit-ready reports and compliance documents
• Maintaining complete payroll history
• Reducing human error in calculations
• Ensuring timely remittance tracking

Who Should Pay Attention to PAYE Reliefs?

This guide is essential for:

• Employees verifying PAYE deductions on payslips
• Employers and business owners managing payroll compliance
• HR and payroll officers responsible for tax remittance
• SMEs and startups setting up payroll systems
• Accountants and consultants advising clients on tax matters
• Tax professionals handling PAYE computations

Final Thoughts

PAYE reliefs are legal tax savings, not loopholes. Under Nigeria’s 2026 tax framework, applying them correctly is critical for compliance and cost control.

To stay compliant:

• Understand all allowable reliefs and their conditions
• Apply them accurately in every payroll cycle
• Use reliable, updated payroll systems
• Maintain proper documentation for all relief claims
• Seek professional support when necessary
• Stay informed about tax law changes