Nigeria 25% tax: Who pays the top rate under the new law?
Nigeria’s 25 per cent tax rate applies to taxable income above ₦50 million a year, while lower income bands carry rates from zero to 23 per cent.
Nigeria’s 25 per cent personal income tax rate applies only to the slice of annual taxable income above ₦50 million, under the Fourth Schedule to the Nigeria Tax Act. The remaining bands carry rates from zero to 23 per cent. The distinction has drawn fresh attention after Senator Ireti Kingibe warned that Nigerians could face a 25 per cent charge on earnings under the tax laws. Senate spokesperson Yemi Adaramodu said the law had already taken effect and urged lawmakers to base public debate on its provisions, Sunday PUNCH reported on October 25.
The law’s published schedule gives readers a more precise answer than the headline figure alone. TheCable fact-check also reviewed Kingibe’s remarks against the enacted rates. The new framework took effect on January 1, 2026, according to the Federal Government’s tax transition guidelines.
What does Nigeria’s 25% tax rate cover?
The Fourth Schedule applies its rates to taxable income after relevant reliefs and exemptions. Each rate covers one part of the income calculation, so a person reaches the 25 per cent band only after the earlier bands have been accounted for.
| Annual taxable income band | Rate |
|---|---|
| First ₦800,000 | 0% |
| Next ₦2.2 million | 15% |
| Next ₦9 million | 18% |
| Next ₦13 million | 21% |
| Next ₦25 million | 23% |
| Amount above ₦50 million | 25% |
The table sets a progressive scale rather than one rate on every naira earned. A worker’s final charge depends on chargeable income after the deductions and reliefs that apply to that person. The Act also exempts employment income for a worker whose gross pay is at or below the national minimum wage.
READ ALSO: Nigeria’s ₦800,000 Tax-Free Band Is Not a Gross-Salary Cutoff
How would the Nigeria 25% tax schedule treat ₦10 million?
Take a person with ₦10 million in annual taxable income after reliefs. The first ₦800,000 falls in the zero-rate band. The next ₦2.2 million attracts 15 per cent, producing ₦330,000 in tax. The remaining ₦7 million sits within the next band and attracts 18 per cent, producing ₦1.26 million.
The combined tax in this example is ₦1.59 million, or 15.9 per cent of the ₦10 million taxable amount. The 25 per cent rate plays no part in this calculation because the income remains below the top band. This example shows how a top marginal rate differs from a flat charge on every naira.
What should workers check on a PAYE calculation?
Employees can compare their payroll calculation with their annual chargeable income, then check which eligible deductions and reliefs their employer included. Pension contributions, qualifying housing fund and health insurance contributions, and rent relief may affect the taxable figure under the Act’s rules. The gross salary printed on a contract therefore gives only the starting point for a personal tax estimate.
For a worker earning the national minimum wage or less, the Act provides a separate exemption for employment income from that job. The exemption sits alongside the zero-rate band and follows its own test. Someone whose pay exceeds the minimum-wage threshold can still benefit from the lower rate bands and any eligible deductions that shape chargeable income.
The practical question for employees is how payroll reached its taxable-income figure. A worker can ask the employer to show the deductions and reliefs used, then compare the result with the statutory bands. The Joint Revenue Board’s 2026 Personal Income Tax Guidelines set out how tax authorities administer the new framework. State revenue services handle PAYE for most employees, while the Nigeria Revenue Service covers specific categories set by law.
FAQs on Nigeria 25% tax
Are all Nigerians charged 25 per cent tax on earnings?
No. The 25 per cent rate applies to the portion of annual taxable income above ₦50 million; lower portions use the rates in the Fourth Schedule.
When did Nigeria’s new tax rates take effect?
The Nigeria Tax Act took effect on January 1, 2026, as stated in the Act and the Federal Government’s transition guidance.
Does the ₦50 million band refer to gross salary?
The threshold applies to taxable income after relevant reliefs and exemptions. A gross salary figure alone cannot show a worker’s final chargeable amount.
Are minimum-wage earners covered by the 25 per cent band?
The Act exempts employment income for a worker earning the national minimum wage or less from that job. The exemption is separate from the 0 per cent band on the first ₦800,000 of taxable income.