Zero Tax for Minimum Wage Earners: How the 0% Bracket Works

The Best News for Low-Income Earners

The Nigeria Tax Act 2025 introduces a 0% tax bracket for the first ₦800,000 of annual income. This is the first time in Nigerian tax history that minimum wage earners are completely exempt from income tax.

Who Qualifies?

You qualify for the 0% bracket if your gross annual income is ₦800,000 or less. That translates to:

• **Monthly**: ₦66,667 or less
• **Weekly**: ₦15,385 or less

Important Notes

1. This applies to gross income, not net income

2. The exemption is automatic - no application needed

3. Applies to both employed and self-employed individuals

How It Works in Practice

Example 1: Minimum Wage Employee

Salary: ₦70,000/month (₦840,000/year)

Under the old system:

• First ₦300,000 at 7% = ₦21,000
• Next ₦300,000 at 11% = ₦33,000
• Remaining at 15% = variable
• **Total tax**: Approximately ₦60,000+

Under the new system:

• First ₦800,000 at 0% = ₦0
• Remaining ₦40,000 at 15% = ₦6,000
• **Total tax**: ₦6,000

Savings: Over ₦54,000 per year!

Example 2: Worker at ₦60,000/month

Salary: ₦60,000/month (₦720,000/year)

• Entire income falls within 0% bracket
• **Total tax**: ₦0

What About Deductions?

Even at 0% tax, your employer may still make statutory deductions:

• **Pension**: 8% of basic salary (goes to your retirement account)
• **NHF**: 2.5% if applicable
• **NHIS**: If enrolled

These are not taxes - they're contributions to your benefit.

What Employers Need to Know

1. Update payroll systems to reflect new brackets

2. Affected employees should see higher take-home pay from January 2026

3. PAYE remittances will decrease for low-income employees

Conclusion

The 0% bracket is a significant win for millions of Nigerian workers. If you're earning minimum wage or slightly above, you'll keep more of your hard-earned money starting January 2026.

Use our PIT Calculator to see your exact tax under the new rules.