Nine Things Nigerians Should Know About New Income Tax
From January 1, 2026, Nigeria’s new income tax laws — the Nigeria Tax Act 2025 and the Nigeria Tax Administration Act 2025 — will officially take effect.
As the date approaches, here’s what everyday Nigerians need to know about how the new system, introduced by the President Bola Tinubu administration to boost productivity, works and who it will affect.
…Most Nigerians Will Pay Less Or Nothing
The new law clearly reduces the tax burden for most people. Anyone earning ₦800,000 or less per year (that’s around ₦66,000 per month) will not pay any income tax.
Even those earning slightly above that amount could still fall within the exempt bracket after applying allowable deductions like pension, health insurance (NHIS), housing fund, or rent relief.
Experts estimate that over 90% of Nigerians will now either be exempt from income tax or pay less than before.
…No Direct Bank Deductions
There is no automatic deduction from bank accounts. The law only requires banks to share information with the tax authorities about customers whose monthly transactions exceed ₦25 million for individuals or ₦100 million for companies.
This is meant to help identify high earners who may be avoiding taxes, not to pull money out of accounts. So if your transactions are below these amounts, you have absolutely nothing to worry about.
…No A Cash Grab By F.G
The income tax reforms are not about the federal government taking more money from citizens.
By law, personal income taxes are collected by state governments, not the federal government.
The only exceptions are income from non-residents, members of the armed forces, and foreign service officers.
In fact, under the new law, even members of the armed forces have been exempted from paying income tax.
…Fairer & More Transparent Rates
Instead of one flat tax rate for everyone, the new income tax uses a progressive rate — meaning people with higher incomes pay a higher rate.
Here’s the simplified breakdown:
Income Band (₦) Tax Rate
0 – 800,000 0%
800,001 – 3,000,000 15%
3,000,001 – 12,000,000 18%
12,000,001 – 25,000,000 21%
25,000,001 – 50,000,000 23%
Over 50,000,000 25%
This structure ensures fairness. The rich pay more, while low-income earners keep more of their money.
…New Reliefs Introduced
While some old reliefs were removed, the new law provides more targeted deductions that encourage savings and responsible spending.
These include:
20% of annual rent, up to ₦500,000
Pension contributions
National Housing Fund (NHF) contributions
National Health Insurance (NHIS) contributions
Life insurance premiums for individuals and their spouses
There’s also good news for those who lose their jobs — severance pay up to ₦50 million is now tax-free.
…Gains Taxes
The law merges capital gains tax with income tax. This means profits from selling property, shares, or other assets are now taxed based on your income bracket.
However, several exemptions apply — for example, your personal home, two private vehicles, and low-value items remain tax-free.
The idea is to make the system simpler and fairer, especially for those earning from multiple sources.
…Remote Work Counts
If you live and work in Nigeria, you will be taxed on your worldwide income — no matter where it’s earned.
Non-residents will only be taxed on income earned in Nigeria.
Remote employees who work abroad but are paid by a Nigerian company may still fall under local tax rules, though more guidelines are expected before the 2026 rollout.
…Small Businesses Left Out
The law defines small companies as those with annual turnover of ₦100 million or less and total fixed assets not exceeding ₦250 million.
These businesses are completely exempt from company income tax, capital gains tax, and the new development levy.
For bigger firms, the company income tax rate remains 30%, but it may be reduced to 25% later — once the National Economic Council gives the go-ahead.
…Starts In January 2026, With Gradual Rollout
The reforms officially take effect on January 1, 2026, giving individuals, businesses, and tax authorities time to adjust their systems and record-keeping before full enforcement.
This transition period is meant to reduce confusion and allow for proper education and compliance campaigns across states.
Source: SocietyNow.ng
