What is PAYE?
PAYE (Pay As You Earn) is the system used in Nigeria to deduct income tax directly from employees’ salaries. Employers are responsible for calculating and remitting this tax to the government.
How PAYE is Calculated
PAYE is calculated based on your chargeable income. This is your total income after deducting allowable contributions such as pension.
Nigeria uses a progressive tax system, which means different portions of your income are taxed at different rates.
Example PAYE Calculation
If you earn ₦300,000 monthly (₦3,600,000 annually), your pension contribution (8%) is deducted first. The remaining income is then taxed using the PAYE tax bands.
This ensures that lower income portions are taxed at lower rates, while higher portions are taxed at higher rates.
Why Understanding PAYE Matters
Understanding PAYE helps you plan your finances better, compare job offers, and know exactly how much tax you are paying.
Many employees do not fully understand how their salary is taxed, which can lead to confusion about their take-home pay.
Use Our PAYE Calculator
To quickly estimate your PAYE tax, use our calculator:
PAYE Tax Calculator Nigeria →