Nigeria Tax Act 2025: A Practical Guide to the New Tax System
Updated for clarity and implementation readiness
Nigeria’s tax system is entering a new phase. Following the signing of the Nigeria Tax Act, 2025 and related legislation in June 2025, the country will implement one of its most significant tax reforms in decades from January 1, 2026.
This guide explains what has changed, who is affected, what reliefs are available, and how individuals and businesses should prepare, using clear, practical language.
Important Notice: This article is for general information and education only. It does not constitute tax, legal, or financial advice. Application of the law may vary based on individual circumstances. Always consult a qualified tax professional before making decisions.
Overview: What Is the Nigeria Tax Act 2025?
The Nigeria Tax Act 2025 is part of a broader reform agenda aimed at:
- Simplifying tax compliance
- Expanding the tax base fairly
- Providing relief for low-income earners and small businesses
- Modernising tax administration through digital systems
The Four Key Tax Laws
The reform is implemented through four interrelated laws:
1. Nigeria Tax Act (NTA)
Substantive tax rules
2. Nigeria Tax Administration Act
Administration and compliance
3. Nigeria Revenue Service Act
Institutional reforms
4. Joint Revenue Board Act
Coordination across government tiers
Together, these laws redefine how taxes are assessed, collected, and enforced in Nigeria.
Who Is Affected by the New Tax System?
Individuals
The new rules apply to:
- Employees (public and private sector)
- Freelancers and gig workers
- Content creators and influencers
- Remote workers earning local or foreign income
- Traders and self-employed individuals
Certain low-income earners and specific categories of income now benefit from expanded exemptions.
Businesses
The reform affects:
- Sole proprietors and one-man businesses
- Partnerships
- Limited liability companies
- Small and medium-sized enterprises (SMEs)
- Large corporations
Businesses should reassess their turnover thresholds, accounting systems, and payroll processes ahead of 2026.
Personal Income Tax: What Has Changed?
1. Income Tax Exemption for Low-Income Earners
Under the new framework, individuals earning up to ₦800,000 per annum may qualify for personal income tax exemption, subject to statutory conditions and definitions.
This provision is designed to protect minimum-wage earners and reduce the tax burden on vulnerable groups.
Action Point: Proper payroll classification and documentation are essential to correctly apply exemptions.
2. Progressive Personal Income Tax Rates
| Annual Taxable Income | Applicable Rate |
|---|---|
| First ₦800,000 | 0% |
| Next ₦2.2 million | 15% |
| Next ₦9 million | 18% |
| Next ₦13 million | 21% |
| Next ₦25 million | 23% |
| Above ₦50 million | 25% |
Rates apply progressively, not as a flat rate on total income.
📌 Calculate Your PAYE Tax
Use our free online calculator to see how the new rates affect your take-home pay:
Nigeria PAYE Calculator (2026)Business Taxation: Key Changes for Companies
Small Business Relief
Businesses that meet the statutory definition of a small company may benefit from:
- Company Income Tax (CIT) exemption
- Reduced compliance obligations
- Relief from selected levies, subject to conditions
Turnover thresholds and eligibility must be carefully reviewed, as definitions differ across tax laws.
Reduced Corporate Tax Rates
For qualifying companies:
- Corporate tax rates are scheduled to reduce progressively from previous levels
- This is intended to improve competitiveness and attract investment
Preparation Tip: Businesses should upgrade their accounting systems to ensure accurate classification and reporting.
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Rent Relief and Allowable Deductions
Rent Relief (Subject to Conditions)
Eligible taxpayers may claim rent relief of up to ₦500,000 annually, capped at 20% of actual rent paid, provided:
- Rent is properly declared
- Supporting documentation is available (lease agreement, payment receipts, bank statements)
Important: Failure to declare accurate rent information may disqualify a claim.
Calculation Examples:
Example 1: Annual rent paid = ₦600,000
- 20% of ₦600,000 = ₦120,000
- Maximum cap = ₦500,000
- Rent relief allowed: ₦120,000
Example 2: Annual rent paid = ₦3,000,000
- 20% of ₦3,000,000 = ₦600,000
- Maximum cap = ₦500,000
- Rent relief allowed: ₦500,000 (capped at maximum)
Pensions, Bonds, and Special Exemptions
Pension & Retirement Benefits
- Approved pension contributions and retirement benefits remain tax-exempt, subject to pension law provisions.
Government Securities
- Interest from Federal and State Government bonds continues to enjoy tax exemption.
Armed Forces & Security Personnel
- Certain military earnings and disability pensions retain statutory exemptions.
Digital Assets and Investment Income
Cryptocurrency & Digital Assets
Profits from cryptocurrencies, NFTs, and similar digital assets are now within the tax net, subject to regulations and enforcement guidelines.
Foreign Income
Some categories of foreign income may qualify for exemption if repatriated through approved Nigerian banking channels, subject to documentation and compliance.
Common PAYE Misconceptions (Clarified)
❌ NOT Taxed:
- Bank transfers
- POS transactions
- Account deposits or withdrawals
- Inter-account transfers
- Loans from financial institutions
✅ Taxed:
- Employment income
- Business profits
- Professional fees
- Investment returns
- Trading income
Example: PAYE Comparison (Illustrative)
Annual Income: ₦6,000,000
- Old structure: Higher effective PAYE
- New structure: Reduced effective PAYE
👉 Actual tax payable depends on reliefs, deductions, and individual circumstances.
🧮 Calculate Your PAYE Instantly
Use PAYE CalculatorWhat Individuals Should Do Before 2026
- Review your PAYE deductions
- Understand applicable reliefs
- Organise rent and pension documentation
- Update payroll records
What Businesses Should Do Now
- Review turnover and tax classification
- Upgrade accounting and payroll systems
- Train internal finance teams
- Seek professional tax review
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- ✔ Payroll & PAYE compliance
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- ✔ Tax advisory & post-incorporation support
Key Takeaway
The Nigeria Tax Act 2025 introduces a more structured, progressive, and compliance-driven tax system. While it offers relief to low-income earners and small businesses, it also places greater emphasis on accurate reporting, digital records, and proper payroll systems.
Preparation—not delay—is the key to benefiting from the reform.