How to Pay Your Tax in Your State Without Guessing or Stress
Once you understand how your tax is calculated, paying it becomes straightforward. So before we even talk about payment, let’s break it down properly.
Who Are You Paying Your Tax To?
Your personal tax goes to your State Internal Revenue Service (IRS) based on where you live.
So if you live in:
· Lagos → Lagos State Internal Revenue Service (LIRS)
· Abuja (Capital) → National Revenue Service (NRS)
· Rivers → Rivers State Internal Revenue Service (RIRS)
According to the National Revenue Service(NRS), individuals are taxed at the state level even if your income comes from outside Nigeria.
Quick Reality Check: Salary vs Business vs Freelance
Before calculation, understand where you fall.
If you work for a company:
Under the Personal Income Tax Act:
Your employer deducts your tax (PAYE) and pays it for you.
So in most cases, you don’t need to stress about manual payment.
If you run a registered company:
Your company pays tax under:
· Companies Income Tax Act
· That tax is separate from your personal tax.
If you’re a freelancer, content creator, and/or remote worker:
You calculate and pay your tax yourself.
This is where most confusion happens and this is why we built FiscalGuard to help you manage your taxes and stay compliant.
Now Let’s Break Down the Law (PITA Nigeria Explained Simply)
Under the Personal Income Tax Act, your tax follows a structure
1. What Exactly Is “Income”?
The law defines income as:
“gains or profits from any trade, business, profession or vocation”
Here’s the simple way to look at it:
If money comes in because of your work, it is income.
Real Examples:
· You design logos for clients → income
· You get paid in dollars from Upwork → income
· You run an Instagram business → income
· You earn from YouTube or brand deals → income
Even if:
· It enters your Payoneer
· It stays in your dollar account
· It comes in bits
👉 It still counts.
2. What Are “Allowable Expenses”? (Where People Get It Wrong)
The law says expenses must be:
“wholly, exclusively, necessarily and reasonably incurred”
Sounds heavy, but here’s what it actually means: Any work-related expense(s) that led to the income that’s not reimbursed by your employer or client, is deductible.
The expense must be:
· For your work
· Needed to earn your income
· Reasonable (as an example, if you buy internet subscription for work and used part to of it binge Netflix, you are expected to reasonably deduct the part used for work)
Examples:
· Internet subscription used for work → allowed
· Logistics like transport cost, co-working hub fees, courses etc. → allowed
· software subscription tools → allowed
FiscalGuard has provided a clean way to report work-related expense in order to legally reduce your tax burden.
Examples That Don’t Count:
· Your food
· Your personal rent (you already have 20% of your annual rent capped at 500,000 as a tax relief)
· Clothes (except strictly work-related)
Simple rule:
If you would still spend it even without working, it’s probably not a business expense.
3. Reliefs (How You Legally Reduce Your Tax)
After expenses, the law allows you reduce your income further using reliefs.
Think of reliefs as:
👉 “Parts of your income the government agrees not to tax”
Key Reliefs You Should Know
Pension
Money you contribute to your pension is not taxed and this makes it one of the simplest ways to legally reduce your tax burden.
For remote workers, freelancers, and content creators, the law provides a micro-pension scheme. This allows you to contribute anywhere between 1% and 33% of your income, giving you flexibility while still enjoying tax relief.
If you’re in a traditional employment setting, the structure is different. Pension contributions are shared between you and your employer:
Employer: contributes 10% of your income
You: contribute at least 8% of your income
In both cases, these contributions are deducted before your tax is calculated—so you’re not just saving for the future, you’re also reducing how much tax you pay today.(Backed by the Pension Reform Act 2014)
National Housing Fund (NHF)
Your NHF contributions are not taxed
(Backed by the National Housing Fund Act)
🛡️ Life Insurance/Assurance
Premiums reduce your taxable income
As a remote worker, content creator, and/or freelancer, the law allows you set aside a portion of your income for life insurance or assurance premium. You can legally take on this relief when you make the payment for the relief.
🏥 Health Insurance
Approved contributions can reduce your tax
As long as it’s legitimate and properly documented
Income – Work-related Expenses – Reliefs = Taxable Income
4. Now Apply Tax Rates
Under the Nigeria Tax Act, 2025, once your tax-free allowance and deductions have been applied, your remaining income is taxed progressively in bands.
This is where the “the more you earn, the more you pay” principle applies but not in the way many people think.
How It Actually Works
7% → applied to the first portion of your taxable income
Then 11%, 15%, 19%, 21%, and up to 24% as your income increases
👉 Important: You don’t pay one flat rate on your entire income.
Instead, your income is split into layers, and each layer is taxed at its own rate step by step.
Simple Way to Think About It
As your income grows, only the extra amount moves into a higher tax band—not everything you earn.
This ensures the system stays fair, especially for low- and middle-income earners, while higher earners contribute more proportionally.
5. Minimum Tax (Important)
Even if everything reduces your tax:
👉 You’ll still pay at least 1% of your total income
How to Actually Pay Your Tax in Nigeria
Once you’ve figured out your numbers, paying your tax is the straightforward part.
Step 1: Get Your Tax Identification Number (TIN)
Register with the Federal Inland Revenue Service to obtain your TIN. This is your unique ID for all tax-related activities.
Step 2: Generate Your Tax Bill
Create your tax bill through your State Internal Revenue Service (IRS) or via their official online portal, based on your state of residence.
Step 3: Make Your Payment
Pay through a bank or approved online channels using your TIN.
Step 4: Keep Your Receipt
Your payment receipt is your proof of compliance so store it safely. You’ll need it for verification.
It’s Simpler Than It Looks
The law can feel overwhelming at first but that’s mostly because of how it’s written.
When you break it down, it’s actually just:
Earn → Remove → Reduce → Pay
Earn your income
Remove your tax-free portion
Reduce with deductions and reliefs
Pay what’s left
That’s it.
Make It Even Easier with FiscalGuard
Instead of figuring all this out manually, you can use FiscalGuard to:
Instantly calculate how much tax you owe
Automatically apply reliefs and deductions
Secure store your tax, expense, and relief receipts for evidence
Stay compliant without second-guessing
👉 Use FiscalGuard to calculate your tax and pay the right amount—no stress, no guesswork.