Is Your 13th Month Salary Taxed in Nigeria? How PAYE Treats a December Bonus in 2026

If your employer pays a 13th month salary or a Christmas bonus, the December payslip often brings a small shock: the bonus is there, but so is a much bigger tax deduction than usual. People then assume the bonus is being taxed at some special, higher rate.

It isn't. There is no separate "bonus tax" in Nigeria. A bonus is simply more salary, and it gets taxed at whatever your top rate already is. What surprises people is that the whole bonus lands at that top rate at once.

The short answer

Yes, a 13th month salary or December bonus is taxed. The Nigeria Tax Act 2025 lists "bonuses" by name as part of what you earn from a job (section 4(2)(a)).
It is taxed at your top rate, not your average rate. For most salaried workers that means 15% or 18% of the bonus goes in PAYE.
There is usually no pension deduction on it. Pension is worked out on your basic salary, housing and transport allowance, and a one-off bonus is normally outside that.
A one-off bonus counts as income on the day it is paid (section 26(2)). A bonus paid on 2 January 2027 falls into 2027's tax, not 2026's.
On ₦300,000 a month, a one-month bonus of ₦300,000 costs ₦54,000 in extra tax. You keep ₦246,000.

What the law actually says

There are three sections of the Nigeria Tax Act 2025 that matter here, and none of them is complicated.

Section 4(2)(a) says income from a job includes "salaries, wages, fees, allowances, compensations, bonuses, premiums, benefits or other perquisites". Bonuses are named outright, so there is no argument about whether a 13th month payment counts. It does.

Section 26(2) deals with timing. Normal salary is treated as earning a little every day. But a "bonus, commission or allowance payable on one occasion only or at intervals exceeding one month" is treated as income "of the day on which it is paid". So what matters is the date the money hits your account, not the year your employer says the bonus is "for".

The Fourth Schedule sets the rates. It is the same six bands as on the rest of your salary:

| Your yearly taxable income | Rate | |---|---| | First ₦800,000 | 0% | | Next ₦2,200,000 (up to ₦3m) | 15% | | Next ₦9,000,000 (up to ₦12m) | 18% | | Next ₦13,000,000 (up to ₦25m) | 21% | | Next ₦25,000,000 (up to ₦50m) | 23% | | Above ₦50,000,000 | 25% |

Because the bonus sits on top of a year of salary, it fills the highest band you have already reached. That is the whole reason it feels heavily taxed.

Why there's usually no pension on a bonus

Your 8% pension contribution is a deduction before tax, so it lowers the tax on your normal pay. The bonus usually doesn't get that cushion.

Under the Pension Reform Act 2014, pension is a percentage of your "monthly emoluments". PenCom's own guidance defines that as whatever your employment contract says, "but should not be less than the total sum of basic salary, housing and transport allowances". A one-off December bonus is normally not part of that, so nothing is taken off it for pension. The full bonus goes into the tax sum.

If your contract does count bonuses as pensionable, 8% of the bonus goes to your pension account and a little less tax is charged. Your HR or payroll team can tell you which applies.

Worked example 1: ₦300,000 a month

Ada earns ₦300,000 a month, so ₦3,600,000 a year. For simplicity, take her pension as 8% of the full amount, and leave out rent relief.

Her normal year, without the bonus:

Pension: 8% × ₦3,600,000 = ₦288,000
Taxable income: ₦3,600,000 − ₦288,000 = ₦3,312,000
Tax: first ₦800,000 at 0% = ₦0; next ₦2,200,000 at 15% = ₦330,000; the last ₦312,000 at 18% = ₦56,160
Total: ₦386,160 for the year, or ₦32,180 a month

Now add a ₦300,000 13th month payment in December:

Taxable income: ₦3,312,000 + ₦300,000 = ₦3,612,000
Tax: ₦330,000 + (₦612,000 × 18%) = ₦330,000 + ₦110,160 = ₦440,160
Extra tax because of the bonus: ₦440,160 − ₦386,160 = ₦54,000

That ₦54,000 is exactly 18% of ₦300,000. Ada was already in the 18% band, so every naira of the bonus is taxed at 18%. She keeps ₦246,000.

Her normal monthly PAYE is ₦32,180. If her employer adds the full bonus tax to December's payslip, December's deduction is ₦32,180 + ₦54,000 = ₦86,180. That jump is the "shock" on the payslip, and it's correct.

Worked example 2: ₦150,000 a month

Emeka earns ₦150,000 a month, so ₦1,800,000 a year.

Pension: ₦144,000. Taxable income: ₦1,656,000
Normal tax: (₦1,656,000 − ₦800,000) × 15% = ₦128,400 a year, or ₦10,700 a month
With a ₦150,000 bonus, taxable income is ₦1,806,000, and tax is ₦150,900
Extra tax: ₦22,500, which is 15% of the bonus. He keeps ₦127,500.

Emeka is in the 15% band, so his bonus is taxed at 15%, not 18%.

When a bonus pushes you into the next band

If your normal taxable income is just under ₦3 million, part of your bonus is taxed at 15% and the rest at 18%.

Take ₦270,000 a month. After pension, taxable income is ₦2,980,800, which is ₦19,200 short of the ₦3 million line. Add a ₦270,000 bonus and:

the first ₦19,200 of it is taxed at 15% = ₦2,880
the remaining ₦250,800 is taxed at 18% = ₦45,144
extra tax: ₦48,024, so you keep ₦221,976

Crossing a band never makes you worse off overall. Only the part above the line pays the higher rate. A bigger bonus always leaves you with more money in your pocket, never less.

If you earn the minimum wage

The Act exempts "income of a person from an employment where such person earns gross income of national minimum wage or less from such employment" (section 163(1)(t)). The national minimum wage is ₦70,000 a month, or ₦840,000 a year, which the Presidency announced in July 2024.

A minimum-wage worker who gets a ₦70,000 13th month payment earns ₦910,000 in the year, which is above ₦840,000. The Act does not say clearly whether a one-off bonus takes you out of the exemption. If it does, the worst case is small. Taxable income would be ₦910,000 minus ₦67,200 pension, or ₦842,800. The tax is 15% of the ₦42,800 above the tax-free ₦800,000: ₦6,420 for the whole year. If your employer takes tax off a minimum-wage bonus, ask them which reading they used.

Things that can make your number different

Rent relief. If you have claimed rent relief (20% of the rent you pay, up to ₦500,000), your taxable income is lower. That might keep you in the 15% band where you'd otherwise be in 18%. You need to claim it in writing for it to count (section 31). See our rent relief guide.
NHF and health insurance. These are also deducted before tax, but like pension, they are normally worked out on basic pay, not on a bonus.
How your employer spreads it. The law fixes how much tax you owe for the year. Payroll systems differ in how they take it month by month. If December's deduction looks much bigger than our examples, ask payroll how they worked it out, and keep your payslips. Over the year, the total should match what the bands give.

Check your own numbers

Put your yearly salary into the Mmiri PAYE calculator twice: once as normal, and once with your bonus added to the gross. The difference in tax is what your bonus will cost you. Remember the calculator takes pension off the whole amount, so if your bonus isn't pensionable, the real extra tax will be a little higher than it shows.

Work out your PAYE with and without the bonus →

Tax rules in this article are taken directly from the Nigeria Tax Act 2025 (Act No. 7, Official Gazette No. 117, Vol. 112): sections 4(2)(a), 26(2), 30, 31, 58, 163(1)(t) and the Fourth Schedule. The pension base is from PenCom's published FAQ on the Contributory Pension Scheme, and the ₦70,000 minimum wage is from the State House announcement of July 2024. Figures checked as of October 2026. Worked examples are simplified (pension on full pay, no rent relief, NHF or health insurance). This article is general information, not tax advice. For your own situation, speak to your employer's payroll team or your state Internal Revenue Service.