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How to Use ClarTax

Complete guides for using our calculators and understanding your tax results.

PAYE Calculator Guide

For employees and salaried workers

What is PAYE?

PAYE stands for Pay As You Earn. It's a system where your employer deducts income tax from your salary every month and sends it to the Nigeria Revenue Service (NRS) on your behalf.

Think of it like this: Instead of paying all your tax at the end of the year, the government collects it bit by bit from each paycheck. This makes it easier for everyone!

Who Should Use This Calculator?

  • Anyone receiving a monthly salary from an employer
  • Contract workers whose employers deduct PAYE
  • Job seekers wanting to know their take-home pay from a job offer
  • Employees wanting to verify their payslip is correct

What You'll Need

Before you start, gather these details from your employment contract or payslip:

  • ✓ Your Basic Salary (the base amount before allowances)
  • ✓ Your Housing Allowance (if any)
  • ✓ Your Transport Allowance (if any)
  • ✓ Any Other Allowances (meal, utility, entertainment, etc.)
  • ✓ Your Annual Rent (if you want to claim rent relief - NEW in 2026!)

Step-by-Step Guide

1

Choose Monthly or Annual

Click either "Monthly" or "Annual" button at the top. Most people use Monthly since that's how you get paid. Annual is useful if you're planning for the whole year.

2

Enter Your Basic Salary

Type your basic salary in the first box. This is your salary BEFORE any allowances.

Example:

If your contract says "₦200,000 basic + ₦80,000 housing", enter ₦200,000 in Basic Salary field.

3

Add Your Allowances

Fill in any allowances you receive. If you don't get an allowance, leave that box at zero.

  • Housing: Money for rent (usually 30-50% of basic)
  • Transport: Money for commute (usually 10-20% of basic)
  • Other: Meal, utility, entertainment, wardrobe allowances
4

Advanced Options (Optional)

Click "Advanced Options" if you want to:

  • • Change pension rate (default is 8% - most people leave this)
  • • Include NHF deduction (2.5% of basic - optional housing fund)
  • NEW 2026: Claim rent relief (20% of your annual rent, max ₦500k)
5

Click "Calculate Tax"

Press the green "Calculate Tax" button. Your results will appear on the right side (or below on mobile). You'll see exactly how much tax you pay and your take-home salary!

Understanding Each Field

Basic Salary

What it is: Your base pay before any additions. This is the foundation of your salary package.

✓ Good Example:

Contract says "₦150,000 basic" → Enter ₦150,000

✗ Common Mistake:

Don't add housing/transport to basic! Keep them separate.

Housing Allowance

What it is: Money your employer gives you specifically for accommodation/rent. Usually 30-50% of your basic salary.

Did You Know?

If your payslip shows "Gross Salary: ₦300k" but doesn't break it down, ask HR for the breakdown. You need to know basic vs allowances for accurate tax calculation!

Transport Allowance

What it is: Money for your daily commute to work. Usually 10-20% of basic salary.

Even if you drive your own car or your company provides transport, if this appears on your payslip, include it in the calculator.

Other Allowances

What it includes: Everything else! Add up all these if you get them:

  • • Meal/Lunch allowance
  • • Utility allowance
  • • Entertainment allowance
  • • Wardrobe allowance
  • • Education allowance
  • • Medical allowance

Pension Contribution (8%)

What it is: Money saved for your retirement. By law, 8% of your basic + housing + transport goes to your pension account every month.

Good News!

Your employer ALSO contributes 10%! So if you contribute ₦20,000/month, your employer adds ₦25,000. You're actually saving ₦45,000 total for retirement!

NHF - National Housing Fund (2.5%)

What it is: Optional contribution (2.5% of basic salary) to help you get a mortgage in the future.

Should you include it? Only tick this if your payslip shows NHF deduction. Not all employers deduct it.

Rent Relief (NEW in 2026!)

What it is: A new tax benefit! You can now deduct 20% of your annual rent (maximum ₦500,000) from your taxable income.

Example:

If your rent is ₦1,200,000/year:

  • • 20% of ₦1.2M = ₦240,000
  • • This ₦240,000 is deducted from your taxable income
  • • You pay LESS tax!

Understanding Your Results

What Each Number Means:

Gross Income

Total of ALL your salary components. This is what your contract promises.

Tax-Free Threshold (₦66,667/month or ₦800,000/year)

Government says the first ₦800k you earn each year is FREE! You pay ZERO tax on this amount. If you earn ₦66,667 or less per month, you pay NO TAX at all!

Taxable Income

The amount you actually pay tax on (after deducting pension, threshold, and rent relief).

Total Tax

What government takes for roads, schools, hospitals, etc. This should match your payslip!

Net Take-Home Pay

THE IMPORTANT ONE! This is the cash that hits your bank account.

"Is This Normal?"

Here's what's typical at different salary levels:

₦100k/month: Pay ₦0 tax (below threshold) → Take home ~₦92k

₦250k/month: Pay ~₦25k tax (10%) → Take home ~₦207k

₦500k/month: Pay ~₦65k tax (13%) → Take home ~₦399k

₦1M/month: Pay ~₦162k tax (16%) → Take home ~₦758k

Common Mistakes to Avoid

❌ Mistake #1: Adding everything to Basic Salary

Don't put your total salary in "Basic Salary". Break it down into basic + allowances as shown on your payslip.

❌ Mistake #2: Forgetting Pension

Always leave pension at 8% unless you have a special arrangement. It's mandatory by law!

❌ Mistake #3: Not Claiming Rent Relief

If you pay rent, ALWAYS claim this! It's free money (you pay less tax). Don't leave it unchecked!

❌ Mistake #4: Using Gross Salary Instead of Breakdown

If your offer letter just says "₦500k gross", ask HR to break it down. Tax calculation needs the breakdown!

Business Tax Calculator Guide

For sole proprietors, partnerships, and companies

What is Business Tax?

Business tax (officially called Company Income Tax or CIT) is tax on your business profit. Unlike PAYE which is on salary, business tax is on the money your business makes after expenses.

In 2026, Nigeria introduced a simplified system: Small businesses (under ₦50M turnover) pay 0% tax, while larger businesses pay 30% CIT + 4% Development Levy.

Who Should Use This Calculator?

  • Business owners (sole proprietors, partnerships, companies)
  • Anyone planning to start a business and wants to estimate tax
  • Accountants preparing tax estimates for clients
  • VAT-registered businesses calculating their VAT liability

What You'll Need

Gather these from your accounting records or financial statements:

  • ✓ Your Annual Turnover (total revenue for the year)
  • Cost of Goods Sold (COGS) - Direct costs to produce what you sold
  • Operating Expenses - Rent, salaries, utilities, marketing, etc.
  • Depreciation - Annual wear and tear on assets (if applicable)
  • VAT Details - If you're VAT registered (sales and purchases)

Step-by-Step Guide

1

Choose Your Business Type

Select one of the three options:

  • Sole Proprietor: You own the business alone (e.g., freelancer, shop owner)
  • Partnership: 2+ people own the business together
  • Limited Company: Registered company (Ltd, PLC)
2

Enter Annual Turnover

Your total revenue for the year BEFORE any expenses. This is all the money that came in.

Example:

If you sold ₦50,000,000 worth of goods/services in a year, enter ₦50,000,000

3

Enter Cost of Goods Sold (COGS)

The direct costs of making the products you sold.

Examples of COGS:

  • Shop: Cost of buying inventory you sold
  • Restaurant: Cost of food ingredients
  • Manufacturer: Raw materials + direct labor
  • Service Business: Often ₦0 (services have no COGS)
4

Enter Operating Expenses

Everything else you spent to run the business:

  • • Salaries and wages
  • • Rent for office/shop
  • • Utilities (electricity, water, internet)
  • • Marketing and advertising
  • • Insurance
  • • Office supplies
5

Enter Depreciation (Optional)

The annual "wear and tear" value of your assets (equipment, vehicles, furniture). If you don't know this, leave it at zero - your accountant calculates this.

6

VAT Section (If Registered)

Only tick "I am VAT Registered" if your turnover is ₦25M+ AND you're registered with FIRS for VAT. Then enter:

  • VATable Sales: Sales where you charged 7.5% VAT
  • Input VAT: VAT you paid on business purchases (you can claim this back)
7

Click "Calculate Business Tax"

Press the green button. You'll see your CIT, Development Levy (if applicable), VAT, and total tax liability!

Understanding Each Field

Turnover vs Profit (VERY IMPORTANT!)

Common Mistake:

Many people confuse these! They are NOT the same.

Turnover (Revenue)

All money that came IN before expenses. This goes in "Annual Turnover" field.

Example: You sold ₦80M worth of goods

Profit

Money LEFT after all expenses. The calculator works this out for you!

Example: ₦80M sales - ₦60M expenses = ₦20M profit

Cost of Goods Sold (COGS)

Simple explanation: How much you spent to make/buy what you actually sold.

Real Example - Ada's Fashion Shop:

  • • Bought 1000 dresses for ₦10M
  • • Sold 800 dresses (200 still in stock)
  • COGS = ₦8M (only count the 800 sold, not the 200 in stock)

Pro Tip:

If you provide SERVICES (consultant, designer, lawyer), your COGS might be ₦0 or very low. Services don't have "goods" to sell!

Operating Expenses

What counts? Everything you spend to keep the business running (that's not COGS).

✓ Include These:

  • • Staff salaries
  • • Rent for shop/office
  • • Electricity & water
  • • Marketing & ads
  • • Accounting fees
  • • Bank charges

✗ Don't Include:

  • • Cost of goods (goes in COGS)
  • • Personal expenses
  • • Drawings/dividends
  • • Loan repayments (principal)
  • • Asset purchases

Depreciation & Amortization

Simple explanation: When you buy equipment/vehicles/furniture, they lose value each year. Depreciation is that loss.

Example:

  • • You bought a delivery van for ₦5M
  • • It loses 20% value per year = ₦1M depreciation annually
  • • Enter ₦1,000,000 in Depreciation field

Note: If you don't have an accountant calculating this, leave it at ₦0. It's better to be conservative!

VAT Registration

When to tick this: Only if BOTH are true:

  • 1. Your annual turnover is ₦25 million or more
  • 2. You are officially registered with FIRS for VAT (you have a VAT certificate)

Not sure? If you don't add 7.5% to your invoices and remit to FIRS, leave this unchecked!

VATable Sales (Excluding VAT)

What it means: Sales amount BEFORE adding 7.5% VAT.

Example:

  • • You sell a product for ₦10,750 (including VAT)
  • • Base price = ₦10,000
  • • VAT (7.5%) = ₦750
  • Enter ₦10,000 in "VATable Sales" (NOT ₦10,750)

VAT on Purchases (Input VAT)

What it means: The 7.5% VAT you PAID when buying things for your business. You can claim this back!

Example:

  • • You bought office furniture for ₦215,000 (including VAT)
  • • Base price = ₦200,000
  • • VAT paid = ₦15,000
  • Enter ₦15,000 in "VAT on Purchases"
  • • Government will deduct this from what you owe!

What Changed in 2026?

✓ Small Business Threshold DOUBLED

Was ₦25M, now ₦50M. More businesses pay 0% tax!

✓ Medium Category REMOVED

Now just 2 categories: Small (0%) and Large (30%). Much simpler!

✓ NEW Development Levy (4%)

Replaces TET, NITDA, and NASENI levies. One payment instead of three! Only for businesses ≥₦50M.

Common Mistakes to Avoid

❌ Mistake #1: Confusing Turnover with Profit

Enter your TOTAL REVENUE in turnover, not your profit. The calculator works out profit for you!

❌ Mistake #2: Including Unsold Inventory in COGS

Only count what you SOLD, not what's still sitting in your warehouse!

❌ Mistake #3: Mixing Personal & Business Expenses

Don't include personal expenses! Only genuine business costs count.

❌ Mistake #4: Ticking VAT Registration When Not Registered

If you're not officially VAT registered with FIRS, leave it unchecked even if your turnover is high!

Tax Glossary Guide

Look up tax terms in plain English

Our Tax Glossary is a searchable dictionary of Nigerian tax terms explained in simple English. No jargon, no confusion!

How to Use the Glossary:

  1. 1. Click the letter of the alphabet for the term you're looking for
  2. 2. Or use the search box at the top to find terms instantly
  3. 3. Read the simple explanation - no tax degree required!

Floating Navigator Tip:

When you scroll down on the glossary page, a floating button appears on the right side. Click it to quickly jump to any letter without scrolling back to the top!

❓ Frequently Asked Questions

Is my data stored when I use the calculators?

No, absolutely not! Everything you enter stays in your browser only. We don't send your data to any server, we don't save it, and we don't see it. When you close the tab, it's gone forever. Your privacy is 100% guaranteed.

How accurate are the calculator results?

Our calculators use the official 2026 Nigerian tax rates and formulas. They're as accurate as any professional tax software! However, every situation is unique, so we recommend using the results as estimates and consulting a tax professional for final numbers, especially for businesses.

What if my payslip doesn't match the calculator?

If there's a significant difference, here's what to do:

  • • Double-check you entered the correct breakdown (basic + allowances)
  • • Verify your pension rate (should be 8%)
  • • Check if you claimed rent relief in the calculator but not at work
  • • Ask your HR/Payroll department to explain the difference
  • • Your employer might be using outdated rates - show them this calculator!
Can I save my calculations?

Currently, we don't have a save feature (for privacy reasons - we don't want to store your data!). But you can:

  • • Take a screenshot of your results
  • • Click "Print Results" and save as PDF
  • • Write down the key numbers
Do I need to create an account to use ClarTax?

No! ClarTax is completely free and requires no registration. Just visit, calculate, and go. No passwords, no emails, no hassle.

How often are the tax rates updated?

We update our calculators immediately when the Nigerian government announces new tax rates or laws. The current calculators use the 2026 tax rates which came into effect on January 1, 2026.

Can I use this for tax filing?

ClarTax calculators are great for estimates and planning, but they don't file your taxes. For actual tax filing, you'll need to:

  • • Employees: Your employer files PAYE for you automatically
  • • Business owners: File through FIRS TaxPro-Max portal or hire an accountant

But you can definitely use our results to verify your numbers before filing!

I'm both employed AND have a business. What do I do?

You'll need to use BOTH calculators:

  • • Use PAYE Calculator for your employment income
  • • Use Business Tax Calculator for your business profit
  • • These are separate taxes - your employer handles PAYE, you file business tax yourself

ClarTax Assistant

Always Available