Nigeria passed four major tax bills in 2025 to modernize the tax system. Some changes help you keep more money. Others increase compliance requirements. Here's what matters for your wallet.
For salary earners: Your take-home pay
Good news: More people pay zero income tax
The tax-free threshold just tripled.
Before: First ₦300,000 of annual income was tax-free
From 2026: First ₦800,000 is tax-free
What this means:
If you earn ₦800,000/year or less (about ₦66,667/month), you pay zero income tax
If you earn more, you only pay tax on income above ₦800,000
Example:
You earn ₦100,000/month (₦1.2 million/year)
Tax-free portion: ₦800,000
Taxable portion: ₦400,000
You only pay tax on that ₦400,000
This puts more money in your pocket every month.
New tax brackets for higher earners
Income tax rates now range from 15% to 25% depending on how much you earn. The exact brackets weren't in the documents we covered earlier, but the key point: lower earners benefit most from the ₦800,000 exemption.
For businesses: VAT changes
VAT rate stays at 7.5% (for now)
Despite earlier proposals to increase VAT to 15%, the rate remains 7.5% for 2026. Future increases may happen gradually.
What's taxed vs. what's exempt
Still exempt from VAT:
Basic food items
Medical services and products
Educational materials and services
Rent on residential properties
Books and educational materials
This means: Your groceries, school fees, and rent shouldn't have VAT added.
Export businesses get relief
If you export goods or services, you can claim back VAT you paid on inputs. This makes Nigerian exports more competitive internationally.
Development levies: New costs for some businesses
What it is
A levy on businesses to fund national development projects. Think of it as a contribution to infrastructure and economic development.
Who pays
Details on exact thresholds and rates weren't specified in the source material, but development levies typically target larger, more profitable businesses rather than small enterprises.
What it funds
Roads, power infrastructure, education, and other public services.
Property and capital gains
Capital gains tax
When you sell property or investments for profit, you may owe capital gains tax.
What counts:
Selling land or buildings
Selling shares or securities
Other asset disposals
The tax applies to your profit (selling price minus what you paid), not the full amount.
Real estate transactions
Property sales are subject to capital gains tax. Keep records of:
What you paid when you bought
Improvements you made
What you sold for
The difference is your taxable gain.
Tax compliance: What's expected of you
For individuals
Keep records of:
Your salary slips
Bank statements showing income
Receipts for major expenses (if you're claiming deductions)
Your employer handles: Withholding your income tax from salary (PAYE) and remitting to tax authorities.
You handle: Filing returns if you have additional income beyond salary (rental income, freelance work, business profits).
For businesses
We covered this in detail in previous articles, but quick reminders:
Monthly tax payments (not annual)
E-invoicing for most transactions
Using your RC Number as your Tax ID
Filing annual returns even if you made a loss
Tax credits and deductions
What you can deduct
Depending on your situation, you may reduce taxable income through:
For individuals:
Pension contributions
Life insurance premiums (within limits)
National Housing Fund contributions
For businesses:
Operating expenses
Capital allowances
Employee costs
Keep receipts and documentation for everything you claim.
What you can't deduct
Personal expenses that aren't business-related, even if they feel work-connected. Your daily lunch isn't deductible. Your work laptop might be.
Digital services tax
If you run an online business or digital platform, new rules may apply to you.
Who it affects
Online marketplaces
Digital platforms
Tech service providers
Streaming services
Social media platforms monetizing Nigerian users
What it means
Digital services provided to Nigerians are now clearly within the tax net, even if your business is based abroad. If you're a Nigerian creator earning from foreign platforms, understand your tax obligations.
Timeline: When changes take effect
January 1, 2026: Most changes go live
₦800,000 tax-free threshold
RC Number becomes Tax ID
Monthly tax payments for companies
E-invoicing for VAT-registered businesses
Already in effect (2025):
New tax laws are passed
FIRS became Nigeria Revenue Service (NRS)
Large taxpayers already using e-invoicing
Common questions
Q: I earn ₦60,000/month. Do I pay tax now?
No. You earn ₦720,000/year, which is below the ₦800,000 threshold. Zero tax.
Q: My employer still deducted tax in January. Is that wrong?
Check your annual salary. If it's above ₦800,000/year, you'll pay tax on the excess. If it's below, talk to your employer—they may not have updated their system yet.
Q: I freelance and earn ₦150,000/month. Do I need to file taxes?
Yes. You earn ₦1.8 million/year, which is above the threshold. You'll pay tax on ₦1 million (₦1.8M - ₦800K).
Q: Does VAT increase affect food prices?
VAT stayed at 7.5%, and basic food items remain exempt. Prices may change for other reasons, but not because of VAT increases.
Q: What if I don't comply?
Penalties are serious: ₦100,000+ for late filing, 10% penalties on unpaid tax, plus interest. Compliance is cheaper than penalties.
Q: Can I still claim pension contributions as a deduction?
Yes, pension contributions remain deductible from taxable income.
Tax laws are complex and everyone's situation is different. This guide gives you the basics, but please talk to a tax professional for advice specific to your circumstances.