Personal Income Tax Compliance in 2026

What Individuals and Employers Must Know

Personal Income Tax Compliance in 2026 represents a critical shift in how individuals, employers, and payroll managers approach tax obligations in Nigeria. The new tax laws replace long-standing assumptions under the Personal Income Tax Act (PITA) with a framework that prioritizes structure, documentation, and economic substance

For many organizations, especially those with December payroll cycles, this is the first full compliance year where Personal Income Tax Compliance must be reassessed, not just recalculated.

Personal Income Tax Compliance in Nigeria: An Overview

Personal Income Tax applies to income earned by individuals from employment, trade, profession, or other sources. In practice, Personal Income Tax Compliance is achieved through:

Pay-As-You-Earn (PAYE) for employees
Self-assessment filings for professionals, entrepreneurs, and individuals with non-employment income

These mechanisms remain in place, but the new framework determines, adjusts, and verifies taxable income differently

Personal Income Tax Compliance and the Transition From PITA

Under PITA, Personal Income Tax Compliance was largely formula-driven. Payroll systems depended heavily on the Consolidated Relief Allowance (CRA), after which graduated tax rates were applied.

The new framework reflects a shift toward:

Targeted reliefs instead of blanket deductions
Greater reliance on identifiable and verifiable expenses
Stronger alignment between income, reliefs, and documentation

This transition does not remove certainty from compliance, it reshapes how certainty is achieved.

Reliefs and Personal Income Tax Compliance in 2026

The Changing Role of Consolidated Relief

Under PITA, CRA formed the foundation of most PAYE computations. A deduction of 20 percent of gross income plus ₦200,000 or 1% of Annual Income applied almost automatically, simplifying PIT Compliance for employers and employees.

In 2026, CRA no longer dominates the computation process. Reliefs are increasingly disaggregated, requiring closer attention to specific qualifying allowances rather than reliance on a single consolidated figure.

Rent Allowance and Personal Income Tax Compliance

A key development affecting PIT Compliance is the recognition of rent as a qualifying personal relief.

The law allows:

20 percent of annual rent paid
Capped at ₦500,000 per annum
Subject to proper documentation

This reflects a policy recognition of housing costs as a significant pressure on disposable income and reinforces the shift toward evidence-based tax reliefs.

Progressive Tax Rates and Personal Income Tax Compliance

Nigeria retains a progressive personal income tax structure. Higher income earners continue to bear proportionately higher tax obligations.

What has evolved within PIT Compliance includes:

Rebasing of income thresholds

Better alignment with inflation and income realities

Clearer linkage between taxable income and real purchasing power

This helps address bracket creep while preserving fairness across income levels.

A Practical PAYE Example for Personal Income Tax Compliance

To illustrate how PIT Compliance now works in practice, consider an employee earning a gross annual salary of ₦6,000,000, contributing to a statutory pension scheme, and paying ₦2,400,000 in annual rent.

PAYE Treatment Under PITA

Previously:

CRA of ₦1,400,000 applied automatically
Rent had no direct impact on taxable income
The balance was taxed using graduated rates

Employees with similar salaries generally arrived at similar PAYE outcomes, regardless of personal living costs.

PAYE Treatment Under the New Framework

Under the current framework:

20 percent of annual rent equals ₦480,000
This falls within the allowable ₦500,000 cap
Relief applies subject to documentation

Statutory deductions and qualifying personal allowances adjust taxable income to reflect a taxpayer’s actual disposable income more accurately

What PIT Compliance Means for Employers

For employers, PIT Compliance in 2026 goes beyond routine payroll processing:

Payroll systems must be reviewed and updated
Employees on similar salaries may have different PAYE outcomes
Documentation quality is now critical
PAYE reconciliation and audit readiness require deeper attention

Compliance is increasingly about computation integrity and supporting records, not just remittance timing.

What PIT Compliance Means for Individuals

For individuals, the evolving framework means:

Understanding qualifying reliefs is essential
Documentation directly affects tax outcomes
Net pay may change even when gross salary remains unchanged

These outcomes reflect structural changes rather than automatic tax increases.

PIT Compliance: Key Takeaways for 2026

Personal Income Tax Compliance in 2026 reflects a maturing tax system focused on transparency, equity, and accountability.

For employers, early alignment of payroll systems is critical. For individuals, understanding how personal circumstances interact with tax outcomes is now more important than ever.

The direction is clear: PIT Compliance is no longer just about applying rates, it is about structure, timing, and evidence.

7 January 2026
Samuel Omofojoye