As of January 1, 2026, a sweeping overhaul of Nigeria’s fiscal landscape has officially commenced. The Nigeria Tax Administration Act of 2025 represents one of the most significant shifts in the country’s economic policy, specifically engineered to shield low-income earners and ignite the engines of small-scale enterprise.
Moving away from aggressive collection, the new framework prioritizes “welfare-centric” taxation. Here is how the 2026 reforms transform your finances:
1. Paycheck Protection: Personal Income Tax (PAYE)
The new law effectively creates a “tax-free zone” for the nation’s most vulnerable workers.
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Zero Tax for Minimum Wage: Anyone earning the national minimum wage or less is now entirely exempt from income tax.
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Income Thresholds: Annual gross income up to ₦1,200,000 is now tax-exempt.
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The Middle-Class Relief: Individuals earning up to ₦20 million annually will see a marked reduction in their PAYE obligations.
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New “Rent Relief”: For the first time, taxpayers can claim a deduction of 20% of their annual rent (capped at ₦500,000) from their taxable income.
2. Small Business Sovereignty: 0% Tax for Growth
The Act redefines the “Small Company” to provide a massive competitive advantage for local entrepreneurs.
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The 0% Club: Businesses with a turnover under ₦100 million and fixed assets below ₦250 million are now exempt from Companies Income Tax (CIT).
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Incentivizing Jobs: Companies receive a 50% additional deduction for increasing staff salaries or hiring new employees retained for at least three years.
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Agricultural Tax Holiday: A five-year tax-free window is now open for crop production, livestock, and dairy businesses.
3. Slashing the Cost of Living: VAT Exemptions
To combat inflation, the government has expanded the list of items carrying 0% VAT, directly lowering the shelf price of essential goods.
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Household Essentials: Basic food items, baby products, and sanitary health products are now VAT-free.
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Energy & Transport: VAT is suspended on petrol, diesel, and solar equipment. Additionally, shared passenger road transport and electric vehicles are exempt.
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Health & Education: Medical services, pharmaceutical products, and all educational materials now attract zero VAT.
4. Shielding Wealth and Retirement
The 2025 Act ensures that life savings and critical assets remain untouched by the taxman.
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Retirement Security: All pensions and gratuities are 100% tax-exempt.
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Asset Protection: You can now sell your private home, up to two personal vehicles per year, or personal effects worth up to ₦5 million without triggering Capital Gains Tax (CGT).
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Digital Banking: Electronic money transfers below ₦10,000 are now exempt from stamp duties, encouraging micro-transactions.
The Big Picture: A Shift in Strategy
Analysts suggest this “carrot-over-stick” approach aims to bring millions of informal businesses into the regulated economy by making compliance more attractive than evasion. By stripping away taxes on basic needs and small business revenue, the Federal Government is betting that increased consumer spending and local production will drive more sustainable long-term growth than traditional tax collection ever could.
