Rent relief under Nigeria’s new tax laws is real, but it is not automatic. Employees must actively disclose rent payments, while employers and payroll teams must apply the relief correctly.
Rent relief can lower the amount of tax employees pay on their income, but only for those who know how to claim it.
Despite its availability, the relief does not apply by default, and many workers miss out simply because the required information is never submitted.
Below is an overview of what rent relief covers and how it works in practice.
Rent relief is an eligible tax deduction available to employees on rent paid for residential accommodation. By reducing the portion of income subject to personal income tax, the relief can lower an individual’s overall tax liability.
According to Section 30(2)(a)(vi) of the Nigeria Tax Act (NTA) 2025, the relief is calculated as 20 percent of the annual rent paid, capped at N500,000, whichever is lower.
To qualify, individuals must accurately declare the actual rent paid and provide any additional information required by the relevant tax authority.
Employees earning a salary through an employer are eligible for rent relief if they provide the relevant information to their employer.
Ajibola Sogunro, tax partner at Forvis Mazars, explains that the process depends entirely on employee cooperation. “If the employee does not supply the employer information, there’s no way the employer will know the rent paid, and the relief cannot be applied,” he said.
For artisans and self-employed individuals, the relief must be claimed directly from the relevant state tax authority, since they have no employer to mediate the process.
Homeowners and others who do not pay rent are not eligible, leaving their only personal relief limited to the first N800,000 of income under the revised tax bands
To access rent relief, individuals are required to declare their annual rent and submit supporting documentation as prescribed by the relevant tax authority. The process differs depending on whether the taxpayer earns through employment or operates independently.
For employees, rent relief is typically applied through the employer’s payroll once valid rent documentation, such as tenancy agreements and receipts, is submitted to HR or payroll units.
Where this information is provided early in the year, employers can factor the relief into monthly PAYE deductions rather than waiting until year-end.
Olufemi Olarinde, head of the fiscal and tax reforms implementation division at the National Revenue Service (NRS), explained that timing matters.
“If you pay your rent in January and provide your receipt, the employer can start deducting and computing your rent relief even before the year ends,” he said.
Even where relief is not fully applied during the year, employees are still required to file their annual tax returns, usually by 31 March of the following year, to claim any outstanding benefit.
For self-employed individuals and artisans, rent receipts or tenancy agreements must be submitted directly to the state’s internal revenue service.
In cases where proper records are unavailable, especially in the informal sector, state tax authorities may rely on presumptive tax regimes to estimate income and applicable reliefs. Tax returns must still be filed within state-specific deadlines for the relief to be recognised.
Rent relief does not apply automatically. Without proof of rent payment, tax authorities and employers have no basis to grant the deduction.
Only rent that has actually been paid qualifies, meaning prepaid rent can be claimed only to the extent that payment has already been made.
Employer compliance is also important. Incorrect PAYE deductions or failure to remit taxes properly can create complications for both employers and employees.
In addition, individual income taxes are filed with the taxpayer’s state of residence, not the NRS, except in cases where the individual operates a business with annual turnover above N100 million.
HR and payroll teams are central to ensuring rent relief works as intended. Beyond collecting documentation, they are responsible for ensuring payroll systems reflect the relief correctly and that deductions match actual remittances.
They also serve as the first point of guidance for employees navigating year-end filings.
As Sogunro notes, “Employers must ensure they comply, but employees must provide the rent details. It’s a shared responsibility.”
With 2026 marking a stricter enforcement of tax filing and remittances, claiming reliefs like rent relief is crucial to avoid overpaying taxes, to ensure compliance with the new law, and to protect both employee and employer from penalties.
Failing to submit documentation could mean missing out on significant deductions, leaving employees paying more than necessary.