Working out your own PAYE takes six short steps once you have the bands in front of you. None of them need anything more than addition and multiplication.
These are the same bands that have applied since 1 Jan 2026, under the Nigeria Tax Act 2025.
Six steps to work it out
- Find your yearly gross pay. Multiply a monthly salary by twelve, or add up irregular income across the year.
- Take off pension. Most employees have a pension contribution deducted before PAYE, commonly 8% of gross pay. This guide uses 8% because it is the PAYE calculator's default; the facts registry behind this series has no pension rate of its own, so check your own payslip for the rate that actually applies to you.
- Mark off the tax-free slice from what is left. 0% on the first ₦800,000 a year, so subtract this amount next if your taxable pay is higher than it.
- Work down the remaining bands in order, starting with 15% on income from ₦800,001 to ₦3 million, then 18% on income from ₦3 million to ₦12 million, and so on, only as far as your taxable income actually reaches.
- Tax only the slice inside each band, not your whole taxable income at that band's rate.
- Add every band's result together. That total is your yearly PAYE; divide by twelve for a monthly figure.
Worked example
Say your pay works out to ₦600,000 a month, or ₦7,200,000 a year gross.
- Gross pay: ₦7,200,000 a year.
- Pension at 8%: ₦576,000.
- Taxable income: ₦6,624,000.
Apply the bands to the taxable figure:
- First ₦800,000: nothing.
- Next 15% on income from ₦800,001 to ₦3 million: ₦330,000.
- Remaining ₦3,624,000 in 18% on income from ₦3 million to ₦12 million: ₦652,320.
Add ₦330,000 and ₦652,320 for a total of ₦982,320 a year, or ₦81,860 a month. Take-home pay is gross less pension less PAYE: ₦7,200,000 minus ₦576,000 minus ₦982,320, or ₦5,641,680 a year, close to ₦470,140 a month.
Without the pension deduction, the same gross would give a bigger tax bill of ₦1,086,000 a year instead of ₦982,320, since more income would reach the bands in the first place.
Notice that step 4 stopped at the second band, because taxable income of ₦6,624,000 does not reach 21% on income from ₦12 million to ₦25 million. Skipping straight to a band without checking whether your taxable income actually reaches it is a common place this sum goes wrong.
Common mistakes when calculating by hand
- Applying the bands to gross pay instead of the taxable figure left after pension.
- Taxing the whole salary at the highest band it reaches, instead of only the slice inside that band.
- Forgetting that the tax-free amount is a yearly figure, not something to subtract every month on top of itself.
- Stopping at the first band that "fits" instead of working through every band the taxable income actually crosses.
- Using an old payroll template built for the pre-2026 relief system, instead of the current six bands.
Let the calculator do it instead
Once you trust the method, the PAYE calculator saves you repeating it every payday. It applies the same bands, with pension already built in, and shows both the tax and the take-home pay together.
It is also a quick way to sanity-check a job offer quoted as a gross salary, before you agree to it, since the take-home figure is what actually lands in your account each month.
Keep a note of which bands your own salary crosses. Payroll teams do occasionally make mistakes, and knowing the method well enough to spot one is the whole point of learning it by hand first.
For the bands themselves, see the 2026 PAYE rates explained. For the filing dates that follow once PAYE is deducted, keep the compliance calendar close by, and the PAYE and state tax hub for everything else in this series.