New Tax Law Raises Workers’ Take-Home Pay

Nigeria’s new tax changes are already showing up in workers’ January salaries, with many employees seeing smaller Pay-As-You-Earn (PAYE) deductions and slightly higher take-home pay, based on early payroll feedback and comments from tax reform officials.

The biggest change is the new tax-free threshold. Under the new framework, the first ₦800,000 of annual income is now treated as tax-free, meaning workers earning roughly ₦66,667 per month can be fully exempt from PAYE.

PAYE is the personal income tax that employers deduct directly from salaries and remit to the tax authorities. So when PAYE drops, the effect is immediate: workers see it directly on their payslips, and their net pay increases without the employer “raising salary.”

Taiwo Oyedele, who chairs the Presidential Committee driving the reforms, said feedback from workers who have received their January 2026 pay suggests PAYE deductions have reduced, leading to higher take-home pay for many salary earners. He also said more work is needed to ensure employers apply the rules correctly, including an engagement session with payroll and tax stakeholders to address implementation gaps.

The reforms took effect from January 1, 2026, and are anchored on new tax laws referred to as the Nigerian Tax Act and the Nigerian Tax Administration Act, according to official explanations around the rollout.

What this means in plain terms is that low-income workers should feel the biggest relief, while higher earners still pay tax, but under updated bands. Some guidance notes explain that income above the ₦800,000 threshold is taxed progressively, with higher rates applying only as income rises.

There is also a reason some people may not feel a dramatic change yet. Payroll teams need to update their systems, and some employers may still be adjusting how they calculate taxable income, reliefs, and deductions. That is why workers are being advised, indirectly, to check their payslips and ask questions if their PAYE looks unchanged despite the new rules.

For the government and the reform team, the early message is simple: reduce the tax pressure on workers, especially those on lower wages, and make the system clearer and easier to run. The real test in the coming weeks will be whether companies apply the rules consistently, and whether workers across sectors see the promised relief reflected correctly in their monthly pay.