What payroll records must I maintain?

In 2026, payroll compliance is a high-priority area for the Nigeria Revenue Service (NRS) and State Internal Revenue Services (like LIRS). Under the Nigeria Tax Administration Act (NTAA) 2025, manual spreadsheets are now considered "high-risk," and you are required to maintain digital-first records for a minimum of 6 years.

Here are the specific records you must maintain to pass a 2026 payroll audit:

1. The Statutory Payroll Schedule

This is your primary monthly record. It must show a line-by-line breakdown for every employee, including:

• Gross Pay: Basic salary plus all allowances (Housing, Transport, Meal, etc.).
• Consolidated Relief Allowance (CRA) & New Reliefs: Note that in 2026, reliefs are more specific (e.g., Rent Relief is capped at ₦500,000 or 20% of rent paid).
• Statutory Deductions: * PAYE Tax: Calculated based on the new 2026 progressive tax bands (starting at 0% for those earning ₦800,000 or less annually).
  • Pension (Employee 8%): Based on Basic, Housing, and Transport.
  • NHF (Employee 2.5%): Based on monthly income.
• Net Pay: The final amount transferred to the employee.

2. Proof of Remittance (The "Compliance File")

Simply deducting the money isn't enough; you must prove you sent it to the government. You need to keep:

• PAYE Receipts: Monthly electronic receipts from the State IRS (due by the 10th of every month).
• Pension Schedules: Confirmation from the Pension Fund Administrators (PFAs) (due within 7 working days of salary payment).
• NSITF & ITF Receipts: Evidence of your employer-only contributions (1% for Employee Compensation and 1% for Training, respectively).

3. Individual Employee Tax Records

In 2026, the NRS requires that every employee record be linked to their Tax Identification Number (TIN). You must maintain:

• Tax ID (TIN) Verification: A copy of the TIN certificate for every staff member.
• Monthly Payslips: Digital copies of payslips issued to employees, clearly showing the 2026 tax breakdown.
• Form H1 (Annual Return): A copy of your annual filing (due by January 31st) which lists all employees and the total tax paid for the previous year.

4. Employment Contracts & Variation Memos

Auditors will check if the salaries you pay match your legal agreements.

• Signed Contracts: Must specify the breakdown of allowances.
• Variation Memos: Any records of bonuses, 13th-month payments, or salary increases. In 2026, "Wage Awards" or transport subsidies for low-income workers (earning <₦100k/month) may have special tax-deduction rules you must document.

Summary Checklist for 2026 Payroll Audit

2026 Alert: The NTAA 2025 imposes a 40% penalty on any tax amount you failed to deduct or remit. Keeping these records is your only defense against "Best of Judgment" assessments, where the government estimates your staff count and charges you arbitrarily.