If you work or do business in Nigeria, your payslip may soon look different. Under the Nigeria Tax Act (NTA) 2025, the government has changed how Personal Income Tax (PIT) is calculated.

One of the most important changes is the removal of the Consolidated Relief Allowance (CRA), which previously reduced taxable income automatically. In its place, the government has introduced Rent Relief, a targeted tax deduction designed to ease the burden on Nigerians who pay rent.

At IREMITTAX, we break down what this change means, who benefits, and how to ensure you do not pay more tax than required.


What Is Rent Relief?

Rent Relief allows eligible taxpayers to deduct a portion of their annual rent from their income before tax is calculated. This reflects the government’s recognition of rent as a significant cost of living for many Nigerians.

How the Calculation Works

Taxpayers may deduct:

  • 20 percent of their annual rent, or
  • ?500,000

The lower of the two amounts applies.


Practical Examples

Entry-Level Earner

Tunde lives in Surulere and pays an annual rent of ?1,000,000.

Twenty percent of his rent is ?200,000.

Tunde can deduct ?200,000 from his taxable income.

Middle-Income Earner

Chidinma lives in Lekki Phase 1 and pays an annual rent of ?2,500,000.

Twenty percent of her rent is ?500,000.

She qualifies for the full ?500,000 rent relief, which is the maximum allowable amount.

High-Income Earner

Bayo lives in Ikoyi and pays an annual rent of ?6,000,000.

Twenty percent of his rent is ?1,200,000.

Due to the ?500,000 cap, his allowable deduction is limited to ?500,000.


Rent Relief Is Not Automatic

Under the previous CRA system, tax relief was applied automatically through payroll. With Rent Relief, taxpayers must actively claim the deduction.

Employers and tax authorities do not have visibility into how much rent a taxpayer pays. Without proper documentation, tax will be calculated on full income, resulting in higher tax obligations.


How to Claim Rent Relief

Employees Under PAYE

Employees should obtain a valid rent receipt from their landlord or property manager and submit it to their employer’s HR or Finance department. The employer will then adjust the employee’s taxable income, reducing monthly PAYE deductions.

Self-Employed Individuals and Consultants

Self-employed taxpayers should retain their rent receipts and declare the rent relief when filing annual tax returns. Tax authorities may request supporting documents during audits. Failure to provide proof may lead to the relief being disallowed, along with additional tax and penalties.

Homeowners

Individuals who live in their own property are not eligible for Rent Relief, as no rental expense is incurred. Under the NTA 2025 framework, this relief is designed specifically for tenants.


Key Takeaways

The Nigeria Tax Act 2025 introduces a documentation-based approach to tax relief. Automatic deductions have been removed, and taxpayers must now provide evidence to benefit from allowable reliefs.

Taxpayers who pay rent should ensure rent receipts are properly issued, retained, and submitted. The maximum rent relief available per year is ?500,000. Without supporting documentation, the relief cannot be claimed.

How IREMITTAX Can Help

IREMITTAX assists individuals and businesses with:

  • Personal Income Tax compliance
  • PAYE registration and management
  • Direct Assessment filings
  • Tax planning and documentation support
  • Advisory services under the Nigeria Tax Act 2025

Our goal is to help you remain compliant while paying only what is legally required.

Disclaimer

This article is provided by IREMITTAX for general informational purposes only and does not constitute professional tax advice. Tax laws and interpretations may vary based on individual circumstances. Readers are advised to consult with a qualified tax professional for guidance specific to their situation.