PAYE in Lagos State: how employers calculate, remit and file

Lagos has more employers than any other state, and most of them deal with the Lagos State Internal Revenue Service (LIRS) every month. This guide explains how PAYE works for Lagos residents in 2026: who pays to LIRS, how the tax is calculated, when it is due, and what changes when your staff live in other states.

PAYE for Lagos residents in five steps

1. 01

   Confirm residence

   Staff who live in Lagos pay PAYE to LIRS; others pay their own state

2. 02

   Register as an employer

   Get your employer tax identification with LIRS

3. 03

   Calculate monthly

   Nigeria Tax Act 2025 bands, deductions and rent relief

4. 04

   Remit by the 10th

   For the previous month's salaries

5. 05

   File by 31 January

   Annual return of each employee's pay and tax for the previous year

Who pays PAYE to LIRS

PAYE on employment income is collected by the state where the employee is resident, not the state where the employer is based. Under the tax reform Acts, a person in employment is treated as resident in the place where they live, which for most staff means where their home is on 1 January of the year.

For a Lagos employer, that means:

• Staff who live in Lagos: PAYE goes to LIRS.
• Staff who live in Ogun and commute to Lagos: PAYE goes to the Ogun State Internal Revenue Service.
• Staff who work remotely from Abuja or Enugu: PAYE goes to the tax authority of the FCT or Enugu State.

Record each employee’s state of residence in your payroll and check it every January, because people move.

How Lagos PAYE is calculated

There is no separate Lagos rate. The Nigeria Tax Act 2025 applies across the country from 1 January 2026, and LIRS administers it for Lagos residents.

1. Annual gross pay: basic plus all allowances.
2. Minus allowable deductions: pension, NHF, NHIS, life insurance premiums and mortgage interest on the employee’s own home.
3. Minus rent relief: 20% of annual rent, capped at ₦500,000. Rents in Lagos are often high enough to reach the cap, so collect rent details from every employee.
4. Apply the bands: 0% on the first ₦800,000, then 15%, 18%, 21%, 23% and 25%.
5. Divide by 12.

Our guide on how to calculate PAYE works through four examples, and the PAYE calculator does the arithmetic for any salary.

Rent relief in Lagos, worked out

Because rent is a large cost for Lagos staff, rent relief matters more here than in many states. An employee on ₦400,000 a month who pays ₦2,000,000 a year in rent gets ₦400,000 of rent relief.

Item	Without rent relief	With ₦2,000,000 rent
Annual gross pay	₦4,800,000	₦4,800,000
Pension (8% of 90% of pay)	₦345,600	₦345,600
Rent relief	₦0	₦400,000
Taxable income	₦4,454,400	₦4,054,400
Monthly PAYE	₦49,316	₦43,316

The relief saves this employee ₦6,000 a month. Employees who pay ₦2,500,000 or more a year in rent get the full ₦500,000 relief.

Deadlines for Lagos employers

PAYE deadlines for Lagos employers

10thMonthly PAYEFor the previous month's salaries

31 JanEmployer annual returnEach employee's pay and tax for the previous year

31 MarIndividual returnsFor individuals who file their own

Source: Nigeria Tax Administration Act 2025; LIRS statement reported January 2026.

LIRS restated the 31 January deadline in January 2026, citing section 14 of the Nigeria Tax Administration Act 2025.

Employers’ returns “must be filed and submitted not later than January 31 of every year.”

LIRS, as reported by The Guardian, January 2026

The annual return covers emoluments paid to employees and, according to LIRS, payments to service providers, vendors and consultants, with confirmation that the year’s taxes were remitted.

Setting up with LIRS

A new employer in Lagos needs to register with LIRS before the first PAYE remittance, so that payments can be credited to the business and to each employee. Keep these details for every employee as well: full name, tax identification number, home address, and the pay and tax figures for each month. Without the employee details, the annual return cannot be completed, and employees may find that their tax was not credited to them when they need a tax clearance certificate.

LIRS publishes its current registration, payment and filing channels on its website. Check them before you start, because the process and portals are updated from time to time.

Employers with staff in several states

Many Lagos businesses have staff who live in Ogun, branches in other states, or remote staff across the country. The rule stays the same: each employee’s PAYE goes to the state where that employee lives.

Employee	Office	Lives in	PAYE paid to
Accountant	Victoria Island	Lekki, Lagos	LIRS
Sales officer	Ikeja	Ota, Ogun	Ogun State IRS
Developer	Remote	Abuja	FCT IRS
Branch manager	Port Harcourt branch	Port Harcourt	Rivers State IRS

Set up a remittance line for each state in your payroll, and file a separate annual return with each state for the staff resident there. Our payroll template totals PAYE by state for this reason.

Penalties

Under the Nigeria Tax Administration Act 2025, an employer that fails to deduct or remit PAYE is liable for the tax it should have deducted, a penalty of 10% of that tax, and interest at the Central Bank of Nigeria rate. The penalty applies whichever state the tax was due to. Late annual returns attract administrative penalties under the same Act.

Common mistakes Lagos employers make

• Paying all PAYE to LIRS. Staff who live outside Lagos must be paid to their own state.
• Ignoring rent relief. Lagos rents make rent relief valuable. If you do not collect rent details, your staff overpay.
• Old formulas. Spreadsheets that still apply CRA or the pre-2026 bands. See what changed in 2026.
• Missing employee details. Remittances without employee tax identification numbers are hard to reconcile.
• Leaving the annual return to January. Reconcile PAYE every quarter, so the return is a summary, not an investigation.

Lagos PAYE checklist

Lagos PAYE checklist

0 of 0 done

Set-up

• Registered with LIRS as an employer
• State of residence recorded for every employee
• Tax identification numbers collected for every employee

Monthly

• PAYE calculated under the 2026 rules, with rent relief where evidenced
• LIRS remittance made by the 10th for Lagos residents
• Other states paid for staff who live there

Annually

• Rent and residence details refreshed in January
• Annual return filed with LIRS by 31 January
• Annual returns filed with any other state where staff live

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For the rest of the payroll cycle, including pension, NHF and NSITF, see our complete payroll guide.