2026 Nigerian Tax Reform –FAQs 

1. What is the Nigeria Tax Act (NITA) 2025 and when does it take effect?

Answer: The Nigeria Tax Act 2025 is a major overhaul of the country’s tax laws, signed into law in June 2025. It introduces a new personal income tax structure and other reforms to modernize payroll and compliance. The new tax rules take effect on January 1, 2026.

2. How do the new tax bands differ from the old ones?

Answer: Under the NITA:
• Employees earning ₦800,000 or less per year pay zero tax.
• Six progressive tax brackets now apply for incomes above ₦800,000.
This replaces the previous tax table under the Finance Act 2020.

3. What is Rent Relief Allowance (RRA) and how is it calculated?

RRA replaces the old Consolidated Relief Allowance. It is computed as 20% of annual gross income or ₦500,000 (whichever is lower) and must be recorded in the employee’s profile(HRIS) for payroll calculation.

4. Do employees need to upload rent documents for RRA?

For clients who require supporting documentation, admins can make use of the document option on their HRMS for employees to upload valid rent certificates or any proof of rent paid  before the RRA is used in tax calculations.

5. How will this change payroll calculation in SeamlessHR?

Once Tax Reform 2025 Mode is enabled in payroll settings and rent data is entered is entered on HRIS, the system automatically calculates taxes using the new tax bands and reliefs.

6. Will this affect net pay for some employees?

Yes. With the new tax structure (especially RRA replacing CRA), net pay may adjust based on the new relief and bands. In some cases this could increase or decrease net pay, depending on individual allowances, deductions and where they fall on the tax band. Then the annual rent also plays a role in net pay.

7. What happens if an employee’s rent isn’t recorded?

If rent isn’t captured, the payroll system will compute tax without Rent Relief Allowance — potentially resulting in higher tax deductions. Capturing rent ensures accurate tax relief.

8. What should employers do to stay compliant?

• Enable Tax Reform 2025 Mode latest by January 1, 2026
• Ensure rent and other relief fields are completed
• Validate payroll settings against the new tax bands
• Communicate changes to employees and update policies

9. Is the new Nigerian Tax Law active on SeamlessHR?

Yes. The 2025 Nigerian Tax Reform (NITA) is fully supported on SeamlessHR.
However, it is not auto-enabled. Each company must switch it on in Payroll Settings.

10. How do I enable the 2025 Tax Reform in SeamlessHR?

Go to:

Launch Payroll → Payroll Settings → Tax Mode
Enable “Tax Reform 2025”

Once enabled, all payroll runs from January 2026 onward will use the new tax law.

11. Why is my January payroll showing zero or negative net pay?

This happens when:

• The expected allowances and deductions are not attached to employee's paygrade.
• When the deduction is more than allowance

12. What does “Remove update on CRA” mean?

The Consolidated Relief Allowance (CRA) no longer exists under the new law.
It has been replaced by Rent Relief Allowance (RRA).

So on the payroll module, remove updates from CRA is no longer used. It expects Rent to be provided instead.

13.What is the major change in the new tax law?

Three big changes affect payroll:

Old System	New NITA System
CRA (20% + ₦200,000)	Rent Relief (20% or ₦500,000 max)
Fewer tax bands	6 progressive tax bands
Lower exemption	₦800,000 annual income now tax-free

14. Who is now exempt from PAYE?

Any employee earning ₦800,000 or less per year now pays zero PAYE.

15. How is Rent Relief calculated?

It is calculated as 20% of annual gross income OR ₦500,000 (whichever is lower). This replaces CRA.

16. Why is rent not showing in tax?

Rent must be:

• Captured in Employee Profile on HRIS
• Approved (if document upload is enabled)

If not entered, the system gives no rent relief.

17. Can NHF, Pension, AVC and HMO still reduce tax?

Yes. The following still reduce taxable income:

• Pension
• Additional Voluntary Contribution (AVC)
• NHF
• HMO (if configured as tax-relief)

But they must be:

• Properly mapped
• Marked as Tax Relief in Payroll Settings
  
  

18. Why are pension and AVC not reflecting before tax?

Because they are either:

• Not mapped as Tax Relief
• Or added as post-tax deductions

Follow this guide to add AVC to Tax Relief 

19. Why do employees on the same pay grade have different tax?

Under the new law, tax now depends on:

• Rent entered
• NHF
• Pension
• AVC
• HMO
• Allowances marked as taxable or non-taxable

Two people on the same salary can now legally have different PAYE.

20. Why is 13th month taxed differently?

13th-month pay is treated as normal income and added to annual taxable income.
If it pushes an employee into a higher tax band, PAYE will increase.

21. Why can’t I see tax breakdown on payslip / ESS? 

The tax breakdown (based on tax bands) is seen by the admins only. Employees are permitted to see the total tax deducted for the month and not a breakdown on how it is calculated.

22. Why is tax not showing on payslip?

This is because tax is not added as a deduction to see under the payslip settings page.

23. Why is a new allowance not taxed?

This is because the allowance is not created as taxable under the allowance page under Payroll Settings.

24. Is SeamlessHR compliant with Nigeria’s 2026 tax law?

Yes, once NITA mode is enabled and employee data is complete, SeamlessHR calculates PAYE using the Federal Government’s 2025 Tax Act.

25. What should every company do before running January 2026 payroll?

1. Enable 2025 Nigerian Tax Reform
2. Enter employee rent on HRIS
3. Validate pension, NHF, AVC
4. Confirm taxable allowances
5. Run a test payroll
   
   

26. Can SeamlessHR automate the new tax law?

Yes. Once enabled, it applies automatically to all future payroll runs.

27.Why am I getting a different tax calculation on my ESS and payroll module?

Check to be sure the annual rent has been added on employee's profile on HRIS. Ensure this is added before starting the payroll run for the month as this is a reason for varying tax. The rent relief will not be included if annual rent is updated after starting a payroll run.