Finance Act 2020 and Personal Income Tax in Nigeria | PAYE Tax Computation in 2021

[@adekanmijao8031]

What a great eyes opener for payroll officer... Thanks so much for the video...

[@segunakiode]

Glad you enjoyed it

[@nkemdilimokafor8317]

This is payroll demystified. Thank you for this insightful session. What a sterling presentation! Many thanks.

[@segunakiode]

Glad you enjoyed it

[@odunlamiolufojude4526]

thanks for the video, it was insightful.

[@segunakiode]

Glad it was helpful!

[@youwale2010]

Ignorance of the Law is not an excuse . Thank you for exploring and explaining the changes lucidly.

[@segunakiode]

Exactly. Thank you for watching!

[@samsonola9691]

This is a good presentation

[@segunakiode]

@Samson Ola - glad it was valuable to you! 🙂

[@adeyemiolushola3156]

This is good, thank you sir

[@segunakiode]

@Adeyemi Olushola - glad it was 🙂

[@changinglifenarrative]

This is instructive, thanks for sharing.

[@segunakiode]

Glad it was!

[@thetaiyeadewumi4088]

Thank you for this insightful video... Signed Newest subscriber!!!

[@segunakiode]

@Taiye Adewumi - I am excited to have you as a subscriber. 🙂 And thank you for your kind words 🙏

[@bolaoladipupo2626]

Thanks for this .. please can you explain what a tax invoice is?? And if it won’t matter if the company has not started pay vat yet..

[@segunakiode]

@Bola Oladipupo - I am not sure I understand your question. Can you rephrase it for clarity?

[@istifanusyakubulumi6774]

Sir please help me with a link to join your EXCEL course on how to use the IF functions. OR please a video on IF functions explainations more especially on how to apply it in TAX and PENSIONS calculation.

[@igwephilipa4703]

how do i include a benefit in kind like health insurance into this spreadsheet ?

[@segunakiode]

@Igwe Philipa - Health Insurance is an employer cost and not subjected to PAYE Tax.

[@igwephilipa4703]

@@segunakiode Thank you. So it does not have to reflect in the pay slip?

[@segunakiode]

@@igwephilipa4703 it doesn't have to reflect on pay slip as it not a payroll item for employees.

[@igwephilipa4703]

Thank you for your prompt responses. I learnt something today.

[@amusaazeez4410]

a good work indeed, how do they calculate on bounus at the end of the year OR is any tax on bounus base on finance act

[@segunakiode]

Bonus will be subjected to the PAYE Tax Table.

[@gabrielolusesi9204]

Thanks for the clear explanations on the main difference between Personal Income Tax CAP P8,Len 2011 and Finance Act20Act 2020. Prior to the emergence of the Finance Acts 2019 and 2030, "Reimbursables by the companies to their employees for performance of official duties, is not Taxable under the 2011. WHAT ISBTGE PISITION NOW UNDER THE FINANCE ACT 2020?

[@segunakiode]

@Gabriel Olusesi - there was not mention of reimbursables in the Finance Act 2020. Which means previous definition in PITA 2011 As Amended remains intact.

[@segunogundiran7710]

Thank you so much. Just to be clear, an employer could choose to apply more than 10% for their contribution. Is there a cap?

[@segunakiode]

@Segun Ogundiran - yes,10% is the minimum contribution an employer can make for Pensions. An employer can choose to make more than 10%.

[@olayinkaakosile]

Thanks for the explanation. I really appreciate. However, I do have a question. Are those pay rates fixed, standard or a company can choose any rate for each allowance as long as it sums up to 100%? Is there any law that stipulates the rates assigned to basic, housing and transport in Nigeria?

[@segunakiode]

@Olayinka Akosile - glad the video was valuable. To your question: the pay rates breakdown are company determined. There is no rule or standard or law guiding it in Nigeria. Hope that helps?

[@olayinkaakosile]

@@segunakiode Thank you for the swift response. You just made my day. God bless you

[@segunakiode]

@@olayinkaakosile you are welcome 😊

[@BodeFeyitimi]

Do you have a video where the formula used for the Tax computation is explained?

[@segunakiode]

You can check my FREE Course on Payroll Management - kzbin.info/aero/PL2LPdLo3jDLPQdZWSRoKKUIWQzqNqVr2u

[@tolulopeokonkwo6578]

Please what tax rate is applicable to taxable income of 8m and above if at 3.2m, 24% is applied and we are still left with 1.9m and above. Annual Gross and basic salary in this case are above 10m and 6m respectively and contribution is made to NHF and pension.

[@segunakiode]

@Tolulope Okonkwo - every taxable income must be subjected to the Tax Table in an incremental fashion and added up to arrive at the PAYE Tax applicable. You use the Payroll template in the video description to see the IF Statement that breaks this down. See Tax Table below: First 300,000 - 7% Next 300,000 - 11% Next 500,000 - 15% Next 500,000 - 19% Next 1,600,000 - 21% Above 3,200,000 - 24% The amount you quoted will be subject to the above 3,200,000 tax rate. Hope this helps?

[@habeebmoshood2521]

Pls, for a company with no such things as NHIS, Pension, NHS etc in place for there employees but still make a deduction on employees basic pay all in the name of tax. What kind of tax deduction is that.

[@segunakiode]

@Habeeb Moshood - what you described is not any form of tax deduction. The only tax deduction accepted is "PAYE Tax" and not more.

[@habeebmoshood2521]

@@segunakiode Thanks for the enlightenment.

[@amacmicrofinancebankltd7101]

After arriving at Total taxable income(Annual Gross Pay-Tax Free Pay), what was the formula you used to get Annual PAYE Tax

[@segunakiode]

There is a Nested IF Statement that computes the Annual PAYE Tax based on the Tax Table.

[@ibomoereolumofa5161]

I still need enlightenment on how the PAYE tax percentage is calculated

[@segunakiode]

PAYE Tax is computed using applicable guidelines. You can download the Excel file I used in the video to get an idea of how it is calculated. Click here - segunakiode.com/resources

[@prudenzarchibong9930]

pls is this the same way PAYE tax is calculated for NGOs?

[@segunakiode]

PAYE Tax is applicable to individuals and not organizations.

[@uzochukwuigweneme3983]

How about those whose taxable are less than N300,000 per annum

[@uzochukwuigweneme3983]

Taxable *income*

[@segunakiode]

@Uzochukwu Igweneme - if taxable income is less than N300,000 per annum, it will be subjected to the Tax rate in the Tax Table. That is "first N300,000 taxed at 7%". Hope that is clear?

[@uzochukwuigweneme3983]

@@segunakiode thanks alot, it is clear that so far as it has been tagged taxable income, we are at the mercies of government.

[@segunakiode]

@@uzochukwuigweneme3983 😂 @mercies of government.

[@judeiruegbukpe4215]

If taxable income is 300k then it’s possible the person is a minimum wage earner. Minimum wage earners have been exempted from PAYE

[@beatricennenna5852]

Thanks for this. It's was insightful. When calculating employer pension in order to get cost-to-company, will it adopt the same guideline like employee pension. I.e are we going to deduct 10% from the gross pay to get a redefined gross pay?

[@segunakiode]

@Beatrice Nnenna - I am glad it was insightful. To your questions, yes same quideline works. Employer pensions is a minimum of 10% of BHT.

[@careerswithbukola]

Thank you for this video. However, I got confused at the later part of calculating the PAYE itself. 1. The Total Taxable Income of 2021, why didnt you use the gross income for CRA? E.g you minus 1,475,000 from 5,000,000 I was thinking it should be “ 1,475,000 from 4,656,250” 2. what % did you use to get #621,500 of 2020 and #638,000 of 2021

[@segunakiode]

Thank you. See my responses to your questions below: 1. According to the Finance Act 2020, the new definition of Gross Income is to deduct the Employee Pensions & NHF from the Gross Pay. 2. The Taxable income is subjected to Tax Table. A Nested IF Statement was used to get the Annual PAYE Tax.

[@israelisrael1358]

please one more question for example taxable income is 350,000 7% of 300,000 = 21,000 11% of what are we using here since 50,000 is less than 300,000...

[@segunakiode]

Whatever is left after the first 300,000. In your example 50,000.

[@israelisrael1358]

@@segunakiode that is 11% of 50,000 will be charge

[@babajideadetomiwa1149]

Thanks for this clarity. My question is that "what is the impact of AVC and Life Assurance Premium?" Is AVC and Life Insurance premium considered as non taxable/tax exempt income only or as Tax Relief only or as both? Can you share a practical Ms Excel file where AVC and Life Insurance Premium is present? Thank you

[@segunakiode]

@Jide Adetomiwa - Additional Voluntary Contribution (AVC) to Pensions as well as Life Insurance Premium paid by an employee are both Tax exempt for purposes of calculation of PAYE Tax. You can download the Excel file I used in the video here - segunakiode.com/resources and edit the Tax Relief part to include AVC and Life Insurance Premium.

[@babajideadetomiwa1149]

Thanks bro. Just to be double sure that they are not part of elements to be considered in arriving at Gross income. They only come as reliefs. I believe this is what you've said.

[@segunakiode]

@@babajideadetomiwa1149 if they are applicable to the employee, they would be deducted going by the new definition of Gross income [Gross Income = Total earnings - Non Taxable Income - Tax Reliefs (e.g. pension, NHF, AVC etc.)]. Life Insurance and AVC would fall under Tax Refiefs. Hope it is clearer now?

[@Faithlepronze.]

thanks for the video, it was insightful. However, my question is, does a company have to deduct pension and NHF if its not applicable to them or do they have to do it because the new act says deduct?

[@segunakiode]

@Faith Okirihienyefa - Pensions and NHF are statutory payroll remittances. They are back by Law/Acts.

[@gabrielolusesi9204]

Sorry for the little ertors below,What is the treatment of the amount reimbursed to staff under the Finance Act 2020? Thanks in anticipatiom

[@segunakiode]

@Gabriel Olusesi - there was no mention of reimbursables in the Finance Act 2020. Which means previous definition in PITA 2011 As Amended remains intact.

[@israelisrael1358]

is this method applicable to employee that are on payroll or is it a general step when treating earn and unearned income of an individual

[@segunakiode]

The video is applicable to employees on payroll.

[@michaelmordi4739]

Many thanks for sharing this sir. However, I’d like to ask a question. Is it advisable to remove pension and NHF components during derivation of Total reliefs simply because your company is new in operation and has not commenced the remittance of those two components (pension and NHF)?

[@segunakiode]

Hello @Michael Mordi - it is a Tax Relief element to be applied during PAYE Tax Computation. If it is removed, it would be a disadvantage to your organisation as your organisation would pay more PAYE Tax for employees.

[@michaelmordi4739]

@@segunakiode many thanks sir. I appreciate your swift response.

[@ruthtaiwoshokunbi5193]

Thanks this wonderful ......but it would have be better without the background sound is not good at all it makes you sound shouting this sound put pressure on the way your voice

[@segunakiode]

Noted. Thank you.

[@elizabetheze9787]

Thank Segun, for this insightful session. my question: aside the pension, NHF, LIP and AVC, are there any other relief component aside the mentioned components. reason each of the listed relieves has its challenges by virtue our ecosystem. thank you

[@segunakiode]

@Elizabeth Eze - glad the video was insightful. To your question - the only other tax relief element left out is interest on mortgage loans.

[@michealpaul7921]

after deduct the non taxable element(pension and NHF) to arrive at our gross pay are we still going to deduct are still going to deduct it again from the gross pay along with the consolidated relief

[@segunakiode]

@Micheal Paul - kindly download the Payroll Template to understand the exact calculations. Download link - segunakiode.com/ytresources

[@johnsonochigbo869]

Thank you sir for this video. Please I want to ask, is children allowance and wife allowance abolish in the finance act of 2020?

[@segunakiode]

That allowance was abolished a long time ago by PITA 2011.

[@johnsonochigbo869]

@@segunakiode oh OK. We solved one question in the class today that contained children and wife allowance but wasn't consider when solving. I thought it was the lecturer that was wrong

[@segunakiode]

📌Remember to drop a comment and to subscribe. 📌Download the practice file here - segunakiode.com/ytresources