Explaining Nigeria’s New Tax Law In A Layman’s Language
In a major fiscal reform aimed at simplifying Nigeria’s tax system and widening compliance, the Federal Government has announced that the new tax law will take effect from 1 January 2026, impacting individuals, small businesses, and digital earners both within and outside the country.
The new framework, released by tax authorities, provides clarity on how income, business profits, digital assets, and other earnings will be taxed, while protecting low-income earners and exempting several categories, including students, military personnel, and pensioners.
Under the law, only income and profits are taxable, meaning bank transfers, deposits, or account balances will not attract any tax. Likewise, loans and grants will remain untaxed, though lenders must pay tax on interest earned.
According to the provisions, anyone earning income in Nigeria, whether employed, self-employed, an influencer, trader, or remote worker, must pay tax, while Nigerians earning abroad will also be liable if classified as tax residents.
Among the major highlights are new personal income tax bands designed to make the system more progressive:
The first ₦800,000 attracts 0%,
The next ₦2.2 million, 15%,
The next ₦9 million, 18%,
The next ₦13 million, 21%,
The next ₦25 million, 23%,
And income above ₦50 million, 25%.
To cushion the impact on workers, the law introduces a 20% rent relief (up to ₦500,000) and exempts those earning below ₦800,000 annually or the national minimum wage from paying tax.
Incentives also extend to agricultural businesses, which will enjoy a five-year tax holiday, and to small enterprises with turnovers below ₦50 million, which remain tax-free.
Digital asset holders, however, will face taxation on profits from cryptocurrencies and NFTs, while creatives, such as authors, musicians, and athletes, will now pay tax on both local and foreign income.
The reform is part of the government’s ongoing effort to modernise tax administration, promote fairness, and boost national revenue without stifling enterprise or productivity.
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