🧾 1. What Changed — A Big Tax System Overhaul
📌 Unified & Modernized Tax Framework
Nigeria replaced many older tax laws — including the Companies Income Tax, Personal Income Tax, VAT, Petroleum Profits Tax, Capital Gains Tax, and Stamp Duties — with a single consolidated legal structure under the Nigeria Tax Act (NTA). This is part of four major Acts signed into law in June 2025. �
Goal:
Simplify tax rules
Reduce conflicts/duplication
Expand the tax base
Improve compliance and administration
📆 2. When It Starts
➡️ Effective from 1 January 2026 — giving businesses and taxpayers time to prepare before the new regime begins. �
👥 3. Key Changes for Individuals
✔️ Personal Income Tax (PIT)
🟢 NEW TAX RATE BANDS (From Jan 1, 2026)
Income Band (₦ per year)
Tax Rate
First ₦800,000 0% (Tax-free)
Next ₦2,200,000 15%
Next ₦9,000,000 18%
Next ₦13,000,000 21%
Above ₦25,000,000 25%
Tax-free threshold: Individuals earning ₦800,000 or less/year pay no income tax. �
Progressive rates: Income above this is taxed in stepped bands up to 25% for higher earners. �
Rent relief and deductions: You can deduct a portion of rent from taxable income (up to a limit), reducing your liability. �
🆕 2. New Relief: Rent Relief Allowance
Under the Nigeria Tax Act, 2025, the CRA has been abolished and replaced with a new rent-based relief — but with different conditions.�
✅ What Rent Relief Allows
Instead of CRA, you can deduct rent you actually paid, calculated as:
📌 Rent Relief = 20% of annual rent paid, OR ₦500,000 – whichever is lower.
You must also declare the actual rent paid with documentation (e.g., rent receipts).
Residency definition clarified: Tax residency rules are now clearer, affecting who is taxed on global vs. Nigerian income. �
🪙 Other Individual Rules
Capital gains tax: Gains from selling assets (including digital assets/crypto) are now taxable (up to 25%). �
Digital & foreign income: Expanded to include digital services, virtual assets, prizes, and other income previously untaxed. �
🏢 4. Key Changes for Businesses
📊 Corporate Tax
Corporate income tax (CIT): The general corporate tax rate has been reduced from around 30% down to ~25% for many companies. �
Small business exemptions: Businesses with ≤ ₦100 m turnover and ≤ ₦250 m in fixed assets may be exempt from CIT, capital gains tax, and the new Development Levy. �
Development Levy (4%): A new unified levy replaces several levies (like education tax and IT levy) on assessable profits to fund national priorities (education, security, tech, etc.). �
🌍 Multinationals & Large Taxpayers
Minimum Effective Tax Rate (ETR): Large businesses (especially multinationals) may face a 15% effective tax floor — ensuring they pay a minimum level of tax even after deductions. �
Anti-avoidance: Stricter rules curb profit shifting, including controlled foreign company (CFC) rules. �
📊 5. VAT & Digital Economy
VAT stays at 7.5% but has been modernised:
Foreign digital services (e.g., Netflix, Spotify, apps) must register and pay VAT in Nigeria.
Expanded VAT scope aims to capture more economic activity. �
📑 6. Tax Administration & Compliance
🏢 New Agencies & Processes
Nigeria Revenue Service (NRS): Replaces the old Federal Inland Revenue Service for federal taxes. �
Joint Revenue Board: Coordinates tax policy across federal, state & local levels. �
Tax Ombudsman & Appeals Tribunal: New bodies to protect taxpayer rights and handle disputes. �
📌 Penalties & Enforcement
Tougher fines apply for late filing, not registering for tax, or providing false information. �
🤔 7. Public Reaction & Debate
There’s ongoing debate about the law’s final wording and implementation. Some lawmakers and public figures are challenging alleged changes made after parliamentary approval, claiming constitutional issues. The government has denied tampering. �
📌 Bottom Line — What This Means for You
For Individuals:
✔ Lower-income earners benefit from new tax-free thresholds and reliefs.
✔ Taxes apply more broadly, including to digital and capital gains income.
For Businesses:
✔ Simplified tax code, lower corporate rate for many.
✔ New levies and anti-avoidance measures increase compliance obligations.
For the Economy:
✔ The reform modernizes tax law, aligns with global standards, and aims to increase revenue and fairness — but enforcement and transparency will be crucial..
📌 Assumptions used (for simplicity)
Tax-free threshold: ₦800,000 per year
Progressive tax rate: Up to 25% for higher income
Examples are annual income (salary or business income)
Figures are illustrative, not exact FIRS calculations
👤 Example 1: Low-income earner
Annual income: ₦700,000
Income is below ₦800,000
Tax payable: ₦0
✅ No personal income tax
👤 Example 2: Entry-level worker
Annual income: ₦1,200,000
First ₦800,000 → Tax-free
Remaining ₦400,000 → taxed (lower band)
Estimated tax: ₦40,000
Monthly tax: about ₦3,300
✅ Much lower burden than before
👤 Example 3: Average salary earner
Annual income: ₦3,000,000
Breakdown (simplified):
₦800,000 → tax-free
Remaining ₦2,200,000 → taxed progressively
Estimated total tax: ₦300,000 – ₦350,000
Monthly tax: about ₦25,000 – ₦29,000
📌 You may also deduct:
Rent relief
Pension contributions
NHF / insurance (where applicable)
👤 Example 4: High-income earner
Annual income: ₦10,000,000
₦800,000 → tax-free
Higher bands apply
Top rate up to 25%
Estimated tax: ₦1.9m – ₦2.2m
Monthly tax: about ₦160k – ₦180k
➡️ High earners contribute more under the new law
🏠 Example 5: Salary + Rent Income
Salary: ₦4,000,000
Rent received: ₦1,200,000
Both incomes are taxable
Rent relief can reduce taxable rent portion
Estimated tax after relief: lower than taxing full ₦5.2m
📌 Landlords must now declare rental income properly
🪙 Example 6: Side hustle / digital income
Salary: ₦2,500,000
Online business (Instagram, crypto, freelancing): ₦1,000,000
Total income = ₦3,500,000
Digital income is now fully taxable
⚠️ Failure to declare = penalties
✅ Key Takeaways (Simple English)
✔ Low earners benefit most
✔ Middle earners pay fairer
tax
✔ High earners pay more
✔ Digital income & side hustles are no longer ignored
✔ Keeping records is now very important