What Nigeria’s 2025 Tax Reform Means for Workers Earning ₦100k to ₦500k

With the signing of the Nigeria Tax Act 2025 and the Nigeria Tax Administration Act 2025 into law on June 26, 2025, Nigerians earning between ₦100,000 and ₦500,000 per month fall into a new, more progressive personal income tax regime.

These reforms aim to broaden the tax base, introduce reliefs for low-income earners, and simplify administration, while ensuring higher earners pay their fair share.

Below, we break down the key changes, show exactly how much tax you’ll now pay, and point you to the official sources.

1. Progressive Tax Bands and Rates

Under Section 58 of the Nigeria Tax Act 2025, personal income tax rates now range from 0% to 25% across seven brackets. The new annual bands (and corresponding monthly equivalents) are listed below (assets.kpmg.com):

Impact on ₦100k–₦500k Earners
Earning between ₦100,000 and ₦500,000 monthly translates to an annual income of ₦1.2 million to ₦6 million. Under the new law:

• ₦100,000/month (₦1.2m annual) falls in the 7% bracket.
  
• ₦300,000/month (₦3.6m annual) straddles the 7% and 11% brackets.
  
• ₦500,000/month (₦6.0m annual) sits at the top of the 11% bracket.

2. How Much PAYE You’ll Pay

Example Calculations:

1. ₦100,000/month (₦1,200,000 annual)
   
   • First ₦800,000 at 0% = ₦0
     
   • Remaining ₦400,000 at 7% = ₦28,000
     
   • Annual tax = ₦28,000; Monthly PAYE ≈ ₦2,333
     
2. ₦300,000/month (₦3,600,000 annual)
   
   • First ₦800,000 at 0% = ₦0
     
   • Next ₦2,400,000 at 7% = ₦168,000
     
   • Remaining ₦400,000 at 11% = ₦44,000
     
   • Annual tax = ₦212,000; Monthly PAYE ≈ ₦17,667
     
3. ₦500,000/month (₦6,000,000 annual)
   
   • First ₦800,000 at 0% = ₦0
     
   • Next ₦2,400,000 at 7% = ₦168,000
     
   • Next ₦3,200,000 at 11% = ₦352,000
     
   • Annual tax = ₦520,000; Monthly PAYE ≈ ₦43,333
     

These PAYE deductions will be made automatically each month by your employer.

3. New Exemptions and Deductions

The reform also introduces several reliefs designed to ease the burden on lower-income earners (nesgroup.org):

• Tax-Exempt Threshold: The first ₦800,000 of annual income (₦66,667/month) is completely tax-free.
  
• Rent Deduction: Employees can deduct up to ₦500,000 annually (₦41,667/month) or 20% of their gross salary—whichever is lower.
  
• Registered Donations: Contributions to approved NGOs or charities—up to a limit—can be deducted.
  
• Work-Related Expenses: Certain necessary expenses (e.g., uniforms, tools) may reduce taxable income; details pending regulations.

4. Employer Incentives

To encourage better pay for low earners, the law offers companies a 50% additional deduction on benefits or raises granted to employees earning ₦100,000 or less monthly. These incentives aim to boost take-home income for the most vulnerable workers (nesgroup.org).

5. Simplified Filing for Lower-Income Workers

The Nigeria Tax Administration Act 2025 mandates a streamlined tax return process for individuals earning below the top brackets, reducing paperwork and compliance costs. This makes it easier for earners between ₦100,000 and ₦500,000 to fulfill their tax obligations without hiring professionals.

6. What You Should Do

1. Check Your Payslip: Compare your new monthly PAYE deductions against the examples above.
   
2. Gather Documentation: Keep records of rent payments, donations, and work-related expenses to maximise deductions.
   
3. Speak to HR or a Tax Professional: Ensure your employer applies the new rates correctly and helps you claim all available reliefs.
   
4. Stay Updated: Watch for regulations detailing deductible work expenses.