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PAYE Basics

Understanding Pay-As-You-Earn tax in Nigeria

What is PAYE?

Pay-As-You-Earn (PAYE) is a tax collection system where employers deduct income tax from employees' salaries before payment. This ensures tax is collected throughout the year rather than in a lump sum at year-end.

How PAYE Works

1. Monthly Deduction: Your employer calculates and deducts tax from your monthly salary based on your gross income.

2. Tax Calculation: The tax is calculated using Nigerian PIT bands and rates, after applying allowable deductions and reliefs.

3. Remittance: Your employer remits the deducted tax to the relevant tax authority (FIRS or State IRS) on your behalf.

Tax Bands & Rates

First ₦300,0007%
Next ₦300,00011%
Next ₦500,00015%
Next ₦500,00019%
Next ₦1,600,00021%
Above ₦3,200,00024%

Allowable Deductions

  • •Pension contributions (up to statutory limits)
  • •National Housing Fund (NHF) contributions
  • •National Health Insurance Scheme (NHIS) contributions
  • •Life assurance premiums