← Back to Guides • Open Calculator

₦800,000 Tax-Free Threshold in Nigeria (2026): How It Works

Last updated: January 2026 planning • Educational guide (not official advice)

In simple words: A tax-free threshold means the first portion of income (up to a limit) is not taxed. Many reputable summaries of Nigeria’s 2026 reforms describe an annual threshold of about ₦800,000.

1) What does “₦800,000 tax-free” mean?

If the first ₦800,000 of your yearly taxable income is tax-free, then tax starts only on income above that threshold. It does not mean you pay “0% tax forever.” It means your income is split into parts: one part is 0%, then higher bands apply.

Quick conversion: ₦800,000 per year is about ₦66,667 per month. Many low-income earners may see little to no PAYE if their taxable annual income falls below this threshold.

2) Taxable income vs gross income (the key difference)

Payroll typically calculates PAYE using taxable income, not simply what you receive in your bank account. Taxable income is often gross earnings minus allowed deductions/reliefs (where applicable).

This is why two people with the same gross salary can have different PAYE: pension contributions, deductions, allowances, and payroll handling can change the taxable amount.

3) Examples (simple planning)

Use the calculator for your exact estimate. These examples show the idea.

Example A: ₦60,000/month
₦720,000/year

Below ₦800,000 threshold → may pay no PAYE if taxable income stays below the threshold.

Example B: ₦80,000/month
₦960,000/year

Only the portion above ₦800,000 is taxed under a threshold model.

Example C: ₦200,000/month
₦2,400,000/year

Tax starts after ₦800,000, then progresses through bands.

Example D: ₦500,000/month
₦6,000,000/year

More of the income enters higher bands; deductions/reliefs matter more.

4) Why your tax is not “one flat percentage”

Progressive tax bands mean different portions of your income are taxed at different rates. Your effective tax rate is total tax divided by total income, and it is usually lower than your top band rate.

Concept Meaning Why it matters
Tax-free threshold First ₦800,000 taxed at 0% Reduces PAYE for low-income earners
Marginal rate Rate on the next portion of income Only that portion is taxed at that rate
Effective rate Total tax ÷ total income Best for budgeting and planning

5) Use the threshold for real-life planning

Budgeting becomes accurate when you plan with take-home pay after tax, deductions, and rent. Many Nigerians pay rent yearly, so always convert rent to monthly equivalent: yearly rent ÷ 12.

Example: ₦1,200,000 yearly rent ÷ 12 = ₦100,000/month. This helps you understand your real “free cash” after rent.

Sources (verify)

Educational guide only • Use the calculator