New Nigerian Tax Laws 2026: What They Really Mean for Your Wallet

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It’s 2026, and Nigeria’s tax system is operating under a new framework.

For years, taxation in Nigeria has been fragmented and outdated. It was a complex maze of overlapping laws and rules that were difficult to interpret, even for those who wanted to comply. Most Nigerians experienced it simply as deductions from their salary, VAT on everyday purchases, or something they hoped to avoid altogether.

The government promises the new tax laws will change that. According to policymakers, the reforms are designed to reduce the burden on low-income earners and small businesses, simplify compliance, and use technology to improve enforcement, particularly among high-income earners and large companies.

So, what actually changed? And what does it mean for your money?

The Reset: What Changed in Plain Terms

Previously, Nigeria’s tax system was governed by several separate laws, each targeting a specific type of taxpayer. The outcome was a complex system that was difficult to navigate and easy to exploit.

The 2026 reforms consolidate much of this framework into two central laws, with a few targeted changes to clarify provisions and streamline enforcement:

The Nigeria Tax Act (NTA): This outlines what is taxed and the corresponding amount.
The Nigeria Tax Administration Act (NTAA): This governs the collection, monitoring, and enforcement of taxes.

The intent is straightforward:

Simplify the rules.
Reduce pressure on lower-income Nigerians
Close the gaps that allowed significant income to remain untaxed.

At its core, the Nigeria Tax Act 2025 is designed to standardise how taxes are administered, reduce confusion, and improve collection efficiency, rather than introducing entirely new taxes.

How Tax Is Actually Paid in Nigeria

Nigeria uses a self-assessment system; however, not everyone pays their taxes the same way.

Salaried employees: Your employer handles everything through the Pay-As-You-Earn (PAYE) system. They calculate, deduct, and remit your tax before your salary hits your account. Your main job is to check that deductions are correct.
Self-employed or business owners: You are responsible for declaring income, calculating tax, and paying it directly. The government relies on your declaration, supported by bank and identity data.

Think of it like this: PAYE is automatic; self-assessment is trust-but-verify.

What The New Laws Mean for Salaries and Personal Income

If you earn a salary, freelance, or make money from multiple income streams, this is where the impact is most direct.

1. The ₦800,000 Exemption

Under the new law, anyone earning ₦800,000 or less per year (about ₦66,600 per month) is exempt from personal income tax. Minimum wage earners are also exempt.

This means:

No PAYE deductions
No personal income tax liability

For low-income earners who previously saw small but painful deductions from already tight salaries, this is a meaningful change.

2. Rent Relief (Applies to All Income Earners)

The 2026 tax laws introduce a rent relief that applies to all income earners. Under this provision, you can deduct 20% of your annual rent from your taxable income, capped at ₦500,000. This means that even if 20% of your rent is higher than ₦500,000, the maximum amount the tax authority will allow you to deduct is ₦500,000.

If you’re a salaried employee, your employer will factor this deduction into your monthly PAYE calculation, reducing the tax withheld from your salary.

If you’re self-employed or running a business, you subtract the relief from your total income when calculating what you owe. In either case, it simply lowers the amount of tax you are required to pay, leaving more in your annual take-home pay.

Why this matters: Rent is one of the biggest expenses for most Nigerians. By reducing the portion of your income that is taxed, this relief lowers your final tax bill, even if your salary itself hasn’t changed.

To benefit from this deduction, you must be able to prove your rent payments. In practice, this means providing a rent receipt. For salaried employees, this may involve submitting the receipt to your employer so the relief can be factored into PAYE calculations and forwarded to the tax authority.

3. Higher Earners Pay More

The new system is explicitly progressive, so the more you earn, the higher the rate applied to your top income. The highest tax rate is now 25%, which only applies to individuals earning over ₦50 million per year.

In simple terms:

Low earners pay nothing
All Income earners benefit from reliefs
High earners contribute a higher share

Progressive Tax Rates for Individuals

Income Tax Brackets	Tax Rate	What It Means
₦0 – ₦800,000	0%	This portion of your income is completely tax-free.
₦800,001 – ₦3,000,000	15%	Only the money in this bracket is taxed at 15%.
₦3,000,001 – ₦12,000,000	18%	Only the income in this bracket is taxed at 18%.
₦12,000,001 – ₦25,000,000	21%	Only the income in this bracket is taxed at 21%
₦25,000,001 – ₦50,000,000	23%	Only the income in this bracket is taxed at 23%
Above ₦50,000,000	25%	Only the income above this bracket is taxed at 25%

How to read it: Each bracket applies only to the portion of your income that falls within it, not your entire salary. For example, if you earn ₦12 million annually, the first ₦800,000 is tax-free, the next ₦2.2 million is taxed at 15%, and the remaining ₦9 million is taxed at 18%.

Who Gets the ₦100 Million Business Exemption

This is one of the most misunderstood aspects of the reform, primarily because the terms “business” and “company” have distinct meanings under Nigerian tax law.

Here’s how it works:

Who qualifies for the ₦100 million exemption under the 2026 framework

Incorporated companies registered with the Corporate Affairs Commission (CAC).
If an incorporated company’s annual turnover is below ₦100 million, it is classified as a small company.
Small companies are exempt from Company Income Tax (CIT).

Who does not qualify

Business names, even if registered with CAC.
Freelancers, consultants, and side hustles.
Sole proprietors and self-employed individuals.

These categories are not taxed under Company Income Tax (CIT). Instead, their income is taxed under personal income tax, which means the ₦100 million exemption does not apply to them.

It is important to note that the exemption applies to company income tax, not all business income. The company might still be liable for other taxes or taxes on income that don’t fall under CIT.

Even exempt companies must register with the tax authority, file annual returns and maintain basic records. Failing to file, even when no tax is due, can still attract penalties. Exemption only reduces the tax payable; it does not exempt you from your obligation to remain visible in the tax system.

What Medium & Large Companies Now Pay

Companies with annual turnover above ₦100 million are subject to tax under the 2026 reforms. Medium and large companies must pay two main taxes on profits: Company Income Tax (CIT) at a rate of 30% and a Development Levy at 4%, resulting in a total tax burden of approximately 34% of their profits.

Note: Companies in the oil and gas sector follow a separate tax system, which includes taxes such as the Hydrocarbon Tax (see Section 72 of the Nigerian Tax Act).

The takeaway: Cross the ₦100 million revenue line, and you jump straight from 0% tax to about 34% on profits. There’s no middle ground.

Minimum Tax for Very Large Companies

For extremely large companies, the law sets a minimum effective tax rate, which applies to:

Companies in a Multinational Entity group with a total group turnover of at least £750 million (or equivalent), and
Any company with an aggregate turnover of ₦50 billion or more in the financial year.

These companies are required to pay at least 15% of their profits in tax. For example, if a company earns ₦50 billion in a year, 15% of that is ₦7.5 billion. Even if their normal tax calculations would result in less, they must top up their payment to reach ₦7.5 billion, ensuring the government collects a minimum share.

Bank Access, BVN, and Surveillance Fears: What the Taxman Can Really Do

One of the biggest worries about the 2026 tax laws is whether the government can indiscriminately access or debit your bank account. Here’s what you need to know:

More visibility, not control: Tax registration now relies on BVN and NIN, linking your identity to financial activity. Banks must report transaction data more transparently to the Nigeria Revenue Service (NRS).
No arbitrary debits: Tax authorities cannot automatically withdraw money. Any enforcement must follow due process, including assessments, notices, and the right to respond.
Self-assessment still applies:
- Independent earners and business owners declare their income, calculate tax owed, and pay it.
- If spending or transactions significantly exceed declared income, the tax authority may query you, but legal procedures must be followed.

For salaried employees:

Employers still calculate, deduct, and remit PAYE before salaries are paid.
Employees must also file an annual tax return declaring all income, even if PAYE has been handled by their employer. This usually involves:
- Gathering all income information: salary slips, allowances, bonuses, and side income.
- Using the tax authority’s online portal (e-filing with your TIN).
- Declaring all income, including amounts already reported via PAYE.
- Submitting the return to ensure your records are accurate and compliant.
- Keeping receipts, payslips, and correspondence for a few years in case of queries.

Filing is primarily a confirmation process; you usually won’t owe extra if your employer has already deducted correctly, but it ensures your Tax Identification Number (TIN) record is accurate and protects you legally.

Transaction notes don’t matter: Words like “food money” or “urgent” don’t affect tax liability. Authorities focus on patterns, volume, and frequency.
Record-keeping is crucial: Maintain clear documentation of all personal and business transactions to avoid misclassification of funds.

What to Do Now

Get a Tax ID (TIN): It’s increasingly required for banking and formal transactions. You can apply and get one online in just a few taps through your state’s tax portal. Once approved, your TIN links your identity to the tax system and keeps your records up to date.

Separate personal and business finances, especially if you run a small business.
Check your payslip: If you earn under ₦66,600 monthly and still see PAYE deductions, something is wrong.
Use available reliefs: Rent relief only works if it’s properly declared.

Nigerians who have not been tax-compliant in previous years may feel the impact of the reforms more sharply, as the new enforcement systems rely on clearer records and structured filings.

The Bottom Line

The 2026 tax reforms are not perfect, but their direction is clear: reduce pressure on low-income earners, simplify compliance for small businesses, and tighten oversight where the money is.

For most Nigerians trying to earn, save, and build stability, the system is, on paper, more favourable than before. But it rewards transparency and organisation, not avoidance.

The days of being entirely invisible to the tax system are fading. Whether that becomes a burden or a benefit depends largely on how well you understand the rules and how prepared you are to work within them.