Complete guides for using our calculators and understanding your tax results.
For employees and salaried workers
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!
Before you start, gather these details from your employment contract or payslip:
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.
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.
Fill in any allowances you receive. If you don't get an allowance, leave that box at zero.
Click "Advanced Options" if you want to:
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!
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.
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!
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.
What it includes: Everything else! Add up all these if you get them:
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!
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.
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:
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.
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
❌ 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!
For sole proprietors, partnerships, and companies
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.
Gather these from your accounting records or financial statements:
Select one of the three options:
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
The direct costs of making the products you sold.
Examples of COGS:
Everything else you spent to run the business:
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.
Only tick "I am VAT Registered" if your turnover is ₦25M+ AND you're registered with FIRS for VAT. Then enter:
Press the green button. You'll see your CIT, Development Levy (if applicable), VAT, and total tax liability!
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
Simple explanation: How much you spent to make/buy what you actually sold.
Real Example - Ada's Fashion Shop:
Pro Tip:
If you provide SERVICES (consultant, designer, lawyer), your COGS might be ₦0 or very low. Services don't have "goods" to sell!
What counts? Everything you spend to keep the business running (that's not COGS).
✓ Include These:
✗ Don't Include:
Simple explanation: When you buy equipment/vehicles/furniture, they lose value each year. Depreciation is that loss.
Example:
Note: If you don't have an accountant calculating this, leave it at ₦0. It's better to be conservative!
When to tick this: Only if BOTH are true:
Not sure? If you don't add 7.5% to your invoices and remit to FIRS, leave this unchecked!
What it means: Sales amount BEFORE adding 7.5% VAT.
Example:
What it means: The 7.5% VAT you PAID when buying things for your business. You can claim this back!
Example:
✓ 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.
❌ 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!
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!
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!
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.
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.
If there's a significant difference, here's what to do:
Currently, we don't have a save feature (for privacy reasons - we don't want to store your data!). But you can:
No! ClarTax is completely free and requires no registration. Just visit, calculate, and go. No passwords, no emails, no hassle.
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.
ClarTax calculators are great for estimates and planning, but they don't file your taxes. For actual tax filing, you'll need to:
But you can definitely use our results to verify your numbers before filing!
You'll need to use BOTH calculators:
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