Guides & compliance

How to calculate PAYE in Nigeria

A practical PAYE calculation workflow: define taxable earnings, apply CRA and deductions, compute annual tax, then derive monthly PAYE.

High-level steps

  1. Confirm pay frequency (monthly vs annual) and define taxable earnings.
  2. Apply eligible reliefs/deductions (CRA, pension, NHF, NHIS, life assurance, etc.).
  3. Compute annual taxable income.
  4. Apply Nigeria's graduated tax bands to calculate annual tax.
  5. Convert annual tax back to the pay period (monthly PAYE).

Understand CRA (Consolidated Relief Allowance)

CRA is a statutory relief that reduces taxable income. Many payroll errors come from applying CRA incorrectly (or inconsistently across employees).

AccessRA computes CRA consistently and shows the trace in the calculator output.

Apply tax bands correctly

PAYE is banded: portions of taxable income are taxed at increasing rates. A correct implementation must:

  • annualize correctly,
  • handle edge cases (e.g., minimum wage exemptions / thresholds),
  • round safely,
  • keep an audit trace (band-by-band).

Use the tool (fastest way to validate your payroll)

Try the PAYE calculator

Tip: Compare your payroll run totals against the calculator for a sample employee each month.

FAQ

Should PAYE be calculated monthly or annually? ▾
PAYE logic is typically annualized for banding/reliefs, then converted back to the pay period (e.g., monthly).
What causes PAYE errors in payroll? ▾
Common causes include wrong CRA application, wrong pension base, misapplied NHF, inconsistent taxable earnings, and missing audit traces.