Nigeria didn't just adjust its tax brackets for 2026 — it replaced an entire deduction mechanism. The old Consolidated Relief Allowance gave everyone the same flat percentage-of-income break regardless of their actual living costs. The new system ties relief directly to what you actually paid in rent, which means two people with identical salaries can now owe genuinely different tax depending on their housing situation alone.
2026 tax brackets (Nigeria Tax Act 2025)
| Taxable Income (NGN) | Rate |
|---|---|
| 0 – 800,000 | 0% |
| 800,001 – 3,000,000 | 15% |
| 3,000,001 – 12,000,000 | 18% |
| 12,000,001 – 25,000,000 | 21% |
| 25,000,001 – 50,000,000 | 23% |
| 50,000,001+ | 25% |
Effective January 1, 2026, the Act replaced the previous ₦300,000 tax-free threshold with ₦800,000 — a meaningful change for anyone at the lower end of the income scale.
Rent relief, the new deduction mechanism
The old Consolidated Relief Allowance is gone entirely, replaced by rent relief: 20% of annual rent actually paid, capped at ₦500,000. This directly ties the deduction to real housing costs instead of a flat formula based on income alone — and it means you now need actual rent payment records to claim it, not just a percentage plugged into a calculation.
Running real numbers through it
₦3,600,000 gross income, ₦1,000,000 paid in annual rent: rent relief comes to 20% × ₦1,000,000 = ₦200,000. Taxable income drops to ₦3,400,000, landing in the ₦3,000,000–₦12,000,000 band. Tax works out to ₦330,000 base plus 18% of the ₦400,000 above that band's floor, for ₦402,000 total — hand-checked, an effective rate of 11.2% on the full gross income.
What the mandatory pension deduction is actually worth
Nigeria's 8% mandatory pension contribution under the Contributory Pension Scheme is fully deductible before tax bands apply — and skipping it in a manual estimate genuinely overstates the real bill. Take ₦5,000,000 gross with no other reliefs: tax comes to ₦690,000. Subtract the mandatory 8% pension contribution (₦400,000) first, and taxable income falls to ₦4,600,000, cutting tax to ₦618,000 — a real saving of ₦72,000, roughly 18% of the contribution itself, hand-verified.
Common mistakes
- Using the old ₦300,000 threshold. Replaced by ₦800,000 starting January 1, 2026 — a frequent source of outdated online estimates.
- Still trying to claim the old CRA formula. Rent relief replaced it entirely, and it requires actual rent payment records, not just a percentage-of-income calculation.
- Entering raw gross salary without subtracting mandatory pension first. The 8% Contributory Pension Scheme deduction happens automatically and is fully deductible before tax applies.
Calculate your exact figure now.
🇳🇬 Nigeria Tax CalculatorFrequently Asked Questions
When did Nigeria's new tax brackets take effect?
January 1, 2026, under the Nigeria Tax Act 2025.
What replaced the Consolidated Relief Allowance?
A rent relief of 20% of annual rent paid, capped at ₦500,000 — you need to have actual rent payments to claim this, unlike the old CRA which was a flat formula based on income alone.
Is the mandatory pension contribution tax-deductible?
Yes, the 8% employee contribution under the Contributory Pension Scheme is fully deductible before tax bands apply.
How much does the pension deduction save in tax?
Roughly your marginal tax rate applied to the contribution — in our worked example, a ₦5,000,000 earner's mandatory ₦400,000 pension contribution saved ₦72,000 in tax.