Life Insurance Tax Relief in Nigeria (2026): How Your Policy and Your Mortgage Can Cut Your PAYE

When people talk about the new tax law, they talk about the bands and the rent relief. Two other reliefs get almost no attention: one for life insurance premiums, and one for the interest on a loan to build your own home. Both are written into the Nigeria Tax Act 2025, and both can lower the PAYE taken from your salary every month.

The problem is that neither one happens by itself. Your employer can't see your insurance policy or your mortgage statement. Unless you tell them, the relief simply doesn't get applied.

The short answer

• Life insurance premiums are tax-deductible. That covers a policy on your own life or your spouse's life, and a deferred annuity. The Act sets no upper limit on the amount.
• Interest on a loan to build your own home is tax-deductible. It has to be the house you live in. Only the interest counts, not the part of each payment that repays the loan.
• Your saving is the premium or interest times your top tax rate. For most salaried workers that rate is 15% or 18%. On ₦240,000 a year of premiums, an 18% taxpayer saves ₦43,200 a year, which is ₦3,600 a month.
• You have to claim it in writing and keep proof. If you don't claim, the relief is not applied. That rule is in the Act itself.

What the law actually says

Section 30 of the Nigeria Tax Act 2025 sets out the "eligible deductions" taken off your income before tax is worked out. It lists six:

1. National Housing Fund (NHF) contributions
2. National Health Insurance Scheme contributions
3. Pension contributions under the Pension Reform Act
4. Interest on loans for developing an owner-occupied residential house
5. Premiums paid on insurance on your life or your spouse's life, or on a deferred annuity for either of you
6. Rent relief: 20% of the rent you pay, up to ₦500,000

Most payroll systems handle the first three automatically, because they come out of your salary anyway. We've covered rent relief in its own article. Items 4 and 5 are the ones that tend to get left out.

Two other sections decide whether you actually get them. Section 31 says no deduction is allowed "unless claimed in writing" in the form your tax authority asks for. Section 32 lets the tax authority ask for documents to back up your claim, and turn it down if you can't produce them.

How much it's worth: three worked examples

A relief doesn't cut your tax naira for naira. It cuts the income your tax is worked out on. So what you save is the relief multiplied by the tax rate on the top slice of your income. That's 15% if your income after reliefs is between ₦800,000 and ₦3 million, and 18% between ₦3 million and ₦12 million.

All three examples below assume the standard 8% pension deduction and no NHF or NHIS.

Ada: ₦500,000 a month, with a life policy

Ada earns ₦6,000,000 a year, pays ₦1,500,000 a year in rent, and has a life insurance policy that costs ₦20,000 a month (₦240,000 a year).

	Without the policy claimed	With the policy claimed
Gross pay	₦6,000,000	₦6,000,000
Pension (8%)	−₦480,000	−₦480,000
Rent relief (20% of ₦1.5m)	−₦300,000	−₦300,000
Life insurance premiums	—	−₦240,000
Income tax is worked out on	₦5,220,000	₦4,980,000
First ₦800,000 at 0%	₦0	₦0
Next ₦2,200,000 at 15%	₦330,000	₦330,000
Remainder at 18%	₦399,600	₦356,400
Tax for the year	₦729,600	₦686,400

Claiming the policy saves Ada ₦43,200 a year, or ₦3,600 a month on her payslip. That's 18% of ₦240,000. In effect, the government pays almost a fifth of her premium, so the policy really costs her ₦196,800 a year instead of ₦240,000.

Emeka: ₦1,000,000 a month, paying off a loan on the house he built

Emeka earns ₦12,000,000 a year. He took a loan to build the house he and his family live in, so he pays no rent. This year he pays ₦1,800,000 in interest on that loan. His lender's annual statement shows the interest separately from the repayment.

• Without the relief, his tax is worked out on ₦11,040,000 and comes to ₦1,777,200.
• With ₦1,800,000 of interest claimed, it's worked out on ₦9,240,000 and comes to ₦1,453,200.

That's ₦324,000 a year less tax, or ₦27,000 a month. It's the biggest of the three savings because home loan interest is a big number, and Emeka is paying 18% on the top part of his income.

Tunde: ₦200,000 a month, with a small policy

Tunde earns ₦2,400,000 a year and pays ₦5,000 a month (₦60,000 a year) for a life policy. After his pension, his tax is worked out on ₦2,208,000, so the top part of his income is taxed at 15%.

Claiming the premium cuts his tax from ₦211,200 to ₦202,200. That's a saving of ₦9,000 a year, which is 15% of ₦60,000. It's not a lot, but it's ₦750 a month for one letter to HR.

The catch at the bottom: if your income after reliefs is under ₦800,000, you pay 0% on it already, so these reliefs save you nothing. If you earn the national minimum wage or less, you're exempt from PAYE anyway.

Put your own salary, rent and premiums into our PAYE calculator →. Click "Add other reliefs (mortgage interest, life insurance)" and enter your yearly total.

The fine print worth reading twice

The wording of section 30 is short, and a few of its words carry a lot of weight.

"On his life or the life of his spouse." The life insurance relief covers a policy on you or your husband or wife. A policy on a child's life, or a savings plan that isn't life insurance or a deferred annuity, doesn't fit that wording. If you're not sure what your policy is, your insurer's policy document will say whether it's life assurance.

Private health insurance is not on the list. The Act allows contributions "under the National Health Insurance Scheme". It doesn't mention a private HMO plan you pay for yourself. Don't count those premiums as a relief unless your tax authority confirms they qualify.

"Interest on loans for developing an owner-occupied residential house." Three conditions sit in that phrase:

• Interest only. Each mortgage payment is part interest and part repayment of the loan. Only the interest counts. Your lender can give you a statement that splits the two.
• Owner-occupied. It has to be a home you live in. A loan on a house you rent out doesn't qualify under this rule.
• "Developing". The Act says developing, which plainly covers building. Whether buying a finished house counts as "developing" is a question the Act doesn't answer directly. If you bought rather than built, ask your state tax authority before you rely on it.

Which year's premiums count? The life insurance clause refers to premiums paid "during the year preceding the year of assessment". Read literally, premiums you pay in 2026 would reduce your tax for 2027. In practice, employers and state tax authorities may apply it differently. The safe approach is to keep receipts for every year and ask your employer's payroll team which year they're applying.

How to claim it

1. Get the documents. For insurance, a premium receipt or annual statement from your insurer showing what you paid. For a home loan, the lender's statement showing the interest you paid during the year.
2. Write to your employer's HR or payroll team. Ask them to apply the relief through PAYE, and attach copies. Section 31 says the claim has to be in writing, so a word in the corridor doesn't count.
3. Put it on your annual return too. The Nigeria Tax Administration Act 2025 expects a return from every taxable person. Your reliefs belong on it. We explain this in Do I need to file a tax return in Nigeria?.
4. Keep the evidence. Under section 32, the tax authority can ask for proof later and refuse the relief if you can't show it.

If you've been paying premiums or home loan interest since January and nobody applied the relief, it isn't necessarily lost. Section 32 allows for a repayment or a lower assessment once you produce evidence for a claim that wasn't allowed in full. Raise it with your employer now, before the end-of-year payroll run, and make sure it goes on your return.

Should you buy a policy just to save tax?

No. The relief takes 15% or 18% off the cost of a policy you genuinely need. That makes a good decision cheaper. It doesn't make a bad one good. Ada still pays ₦196,800 a year for her cover. If she didn't need life insurance, the "saving" would just be spending money she didn't have to.

The people who gain most are the ones who already have a policy or a home loan and have never told their employer. For them, this is free money that's been going to the tax office by default.

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Reliefs and tax bands are taken from the text of the Nigeria Tax Act 2025 (Official Gazette No. 117, Vol. 112), sections 30–32 and the Fourth Schedule, as published by the Gombe State Internal Revenue Service. Checked as of October 2026. Worked examples use the same calculation as our PAYE calculator and assume an 8% pension deduction. Real payslips vary with allowances, NHF, NHIS and how your employer applies reliefs. Where the Act's wording is open to interpretation, as with "developing" and the year in which premiums count, we've said so. Confirm with your employer or state tax authority before relying on it. This article is general information, not financial or tax advice.