Is Employee Income Taxable in Nigeria?
Quick Answer
Nigerian employees earning up to ₦800,000 annually pay zero tax. Above that, progressive rates apply: 15% (₦800K-₦3M), 18% (₦3M-₦12M), 21% (₦12M-₦25M), 23% (₦25M-₦50M), and 25% (above ₦50M). Your employer deducts PAYE automatically, but you can claim additional reliefs for rent, life insurance, and dependents.
Under the Nigeria Tax Act 2025 (effective January 1, 2026), all income earned by Nigerian residents is subject to Personal Income Tax (PIT). This includes income earned from Nigerian sources and, for residents, income earned abroad.
The good news is that the 2026 tax law introduced a ₦800,000 tax-free threshold. If your total annual income is below this amount, you won't owe any income tax.
How Employees Typically Get Paid
All of these income sources are taxable and should be reported in your annual tax return. KeepAm helps you track each income type separately for accurate reporting.
Tax Rates for Employees (2026)
Employees pay the same Personal Income Tax rates as all Nigerian residents.
| Annual Taxable Income | Tax Rate | Cumulative Tax |
|---|---|---|
| ₦0 - ₦800,000 | 0% | ₦0 |
| ₦800,001 - ₦3,000,000 | 15% | ₦330,000 |
| ₦3,000,001 - ₦12,000,000 | 18% | ₦1,950,000 |
| ₦12,000,001 - ₦25,000,000 | 21% | ₦4,680,000 |
| ₦25,000,001 - ₦50,000,000 | 23% | ₦10,430,000 |
| Above ₦50,000,000 | 25% | Variable |
Note: These are marginal rates. You don't pay 15% on all your income—only on the portion above ₦800,000. Use our calculator for an exact breakdown.
Employee Tax Calculator
Enter your annual income to see your tax estimate
Deductible Expenses for Employees
Reduce your taxable income by claiming legitimate business expenses.
8% of gross salary (employee portion)
National Housing Fund (2.5% of basic)
National Health Insurance Scheme
20% of annual rent paid (max ₦500,000)
Premiums on life assurance policy
Contributions to approved gratuity scheme
Important: Keep receipts and documentation for all business expenses. Without proper records, you cannot claim these deductions if audited by FIRS.
Example Tax Calculation
Employee Tax Calculation
Employee earning ₦6,000,000 annual gross salary with standard deductions
What About Foreign Income?
Many employees earn income in foreign currencies. Here's how it's taxed.
If you're a Nigerian tax resident, all your worldwide income is taxable, including payments received in USD, GBP, EUR, or any other currency.
Foreign income should be converted to Naira at the exchange rate on the date of receipt. KeepAm automatically tracks exchange rates and converts your foreign income for tax purposes.
If you've already paid tax on foreign income in another country, you may be able to claim Foreign Tax Credit to avoid double taxation. Nigeria has tax treaties with several countries.
Should You Register a Company?
At higher income levels, operating as a company may offer tax advantages.
Sole Proprietor
- • Simpler setup and compliance
- • Personal tax rates (0% - 25%)
- • Easier to manage
- • Best for income under ₦30M/year
Limited Company
- • 0% CIT if turnover ≤₦100M
- • 20% CIT for medium (₦100M-₦500M)
- • Better for multiple income streams
- • Consider when earning ₦30M+/year
Note: Company registration involves additional compliance requirements including annual returns, audited accounts, and potentially VAT registration. Consult a tax professional before making this decision.
How to File Taxes as a Employee
Get Your TIN
Track All Income
Document Expenses
Calculate Your Tax
File Before March 31
Filing Deadline
Personal Income Tax returns must be filed by March 31 each year for the previous tax year. Late filing attracts penalties of ₦50,000 for the first month plus ₦25,000 for each subsequent month.
Common Tax Mistakes Employees Make
Frequently Asked Questions
Ready to Take Control of Your Taxes?
KeepAm is built specifically for Nigerian employees like you. Track income, maximize deductions, and file with confidence.