This guide explains how to calculate Nigeria PAYE in 2026 step by step, using clear explanations and practical examples. You will also learn how digital payroll and accounting tools can simplify compliance during this transition period.

What Is PAYE in Nigeria?

PAYE (Pay As You Earn) is the personal income tax deducted monthly from an employee’s salary and remitted to the relevant State Internal Revenue Service (SIRS).

Under the new tax reorganisation, PAYE computation now reflects:

• Revised tax bands
• Updated reliefs and allowances
• Simplified compliance expectations for employers

For background on the broader tax reform, see our detailed guide: Nigeria Tax Act 2025 – A Complete Guide to the New Tax Revolution.

Key Components of Nigeria PAYE Calculation (2026)

Before computing PAYE, you must identify the correct components of taxable income.

1. Gross Annual Income

This includes:

• Basic salary
• Housing allowance
• Transport allowance
• Other taxable allowances

2. Statutory Reliefs and Deductions

Under the 2026 framework, allowable reliefs typically include:

• Pension contribution
• National Housing Fund (NHF)
• Life assurance (where applicable)
• Approved rent relief (subject to conditions)

These deductions reduce the taxable income before applying tax bands.

Nigeria PAYE Tax Bands (2026 Overview)

After deducting reliefs, the remaining taxable income is charged progressively based on approved PAYE bands. The exact computation is what most taxpayers find confusing — which is why examples matter.

To simplify this, we provide a free online PAYE calculator that automatically applies the correct bands.

Step-by-Step: How to Calculate PAYE in Nigeria (2026)

Step 1: Determine Annual Gross Income

Add all taxable salary components earned in one year.

Step 2: Subtract Allowable Reliefs

Deduct pension, NHF, rent relief, and other approved reliefs to arrive at chargeable income.

Step 3: Apply PAYE Tax Bands

Apply the progressive tax rates to portions of the chargeable income according to the PAYE bands.

Step 4: Compute Annual PAYE

Sum the tax charged at each band.

Step 5: Divide by 12 (Monthly PAYE)

Annual PAYE ÷ 12 = monthly PAYE deduction.

PAYE Calculation Nigeria 2026 – Practical Example

This tool automatically:

• Applies the correct tax rates
• Produces monthly and annual PAYE figures
• Reduces computation errors

Common PAYE Mistakes Employers and Employees Make

How Accounting Software Helps with PAYE Compliance (2026)

With Nigeria’s ongoing tax reorganisation, manual payroll management is no longer sustainable for growing businesses.

Modern accounting and payroll software help by:

• Automating PAYE calculations
• Ensuring compliance with updated tax laws
• Generating accurate payroll reports
• Supporting audit and tax filing processes

At Brattle Multiconcepts Consult, we support businesses with:

• Accounting software setup (QuickBooks, Zoho Books, Sage, ERP-based systems)
• Payroll configuration aligned with current PAYE rules
• Ongoing accounting and compliance support

You can explore more of our accounting software and payroll compliance insights on our blog.

Who Should Use This PAYE Guide?

This guide is relevant for:

• Employees verifying their PAYE deductions
• Employers and business owners
• HR and payroll officers
• Accountants and consultants
• Startups adapting to Nigeria’s new tax regime

Final Thoughts

Understanding how to compute Nigeria PAYE in 2026 is no longer optional. With the new tax structure, accuracy and compliance matter more than ever.

To stay compliant and avoid costly errors:

• Use updated PAYE computation methods
• Adopt accounting and payroll software
• Seek professional support when necessary