The Finance Act, 2020 was recently published and we’ve noticed some key elements that will affect how personal income tax will now be computed.

Here are the sections of the Act that affect Personal Income Tax:

  1. Section 29 of the Finance Act 2020, which states: “Gross income means income from all sources less non-taxable income, on which no further tax is payable, tax-exempt items listed in paragraph (2) of the Sixth Schedule, and all allowable business expenses and capital allowance”.
  2. Section 30 of the Finance Act 2020 states that “Provided that minimum tax under this section or as provided for under the Sixth Schedule to this Act shall not apply to a person in any year of assessment where such person earns the National Minimum Wage or less from employment”


  • Consolidated Relief Allowance (CRA) is computed as 20% of Gross Income + 1% of Gross Income or N200,000 (whichever is higher) even when there was no definition of gross income before the Finance Act 2020.

The Finance Act 2020 has now defined the gross income for computing CRA. Gross income is now equal to total earnings minus non-taxable income and tax-exempt items.

Gross Income = Total Earnings The general practice
Gross Income = Total earnings – Non Taxable Income – Tax Exemptions (e.g pension) The new law(FA20)
  • Minimum tax no longer applies to persons who earn national minimum wage or less. Since minimum wage is currently N30,000 per month, then all employees earning N30,000 or less are tax exempt.


As defined in FA20, The new gross income will reduce the amount of Consolidated Relief Allowance claimable by taxpayers. This means that employees who have tax exemptions like employee pension and NHF will have a reduced net salary because of the increased PAYE.

There is no doubt that the amendments will have implications for all taxpayers – employers and employees. We’ve already noticed that while some employers are aware of the new law and are ready to implement it, others are not set for implementation because of the ripple effect it will have. Then again, some other employers may not yet be aware of this new law.

At SeamlessHR, the FA20 means that we must configure SeamlessPayday, our payroll product for automatic tax computations that will accommodate both methods of tax computation. This way, we will accommodate companies ready to adopt the new law and those who are not, until there is full adoption.