Monthly PAYE to remit after statutory reliefs.
Monthly PAYE to remit
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Annual PAYE
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Chargeable income
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Worked example
Take an employee on N500,000 a month, so N6,000,000 a year. The employer deducts an 8% pension contribution of N40,000 a month on the full pay, but here the worked input uses N32,000 a month, which is N384,000 a year of relief. Subtracting that relief from gross gives chargeable income of N5,616,000. The first N800,000 is tax-free. The next N2,200,000 (from N800,000 to N3,000,000) is taxed at 15%, which is N330,000. The remaining N2,616,000 (from N3,000,000 to N5,616,000) falls in the 18% band and adds N470,880. Annual PAYE is N800,880, so the employer remits about N66,740 each month.
| Step | Amount (NGN) |
|---|---|
| Annual gross pay | 6,000,000 |
| Less pension relief | 384,000 |
| Chargeable income | 5,616,000 |
| Tax at 15% band | 330,000 |
| Tax at 18% band | 470,880 |
| Annual PAYE | 800,880 |
| Monthly PAYE to remit | 66,740 |
How it is calculated
PAYE is computed on an annual basis under the Nigeria Tax Act 2025, then split into twelve monthly remittances. The employer first annualises the monthly gross, then subtracts statutory reliefs such as the employee pension contribution, NHF, and NHIS to arrive at chargeable income. The six progressive bands are applied to that chargeable income, not to gross pay, with the first N800,000 free of tax and slices above it taxed at 15%, 18%, 21%, 23%, and 25%. The total annual tax is divided by twelve to get the monthly figure deducted from each payslip. Employees whose total annual employment income is at or below the national minimum wage of N840,000 are fully exempt and have no PAYE deducted.