Effective January 1, 2026, the Nigeria Tax Act 2025 fundamentally changes how individuals and companies pay tax. The old Consolidated Relief is gone, replaced by wider tax bands and a new rent relief deduction. This guide explains the 0% rate on your first ₦800k, the new progressive rates for salary earners, and the ₦50m turnover exemption for small businesses. Read this to calculate your exact liability under the new law.

A Practical Guide to the Nigeria Tax Act 2025If you live or do business in Nigeria, the way you calculate your taxes is about to change significantly. On January 1, 2026, the Nigeria Tax Act 2025comes into full effect, repealing and replacing multiple old laws (like the Personal Income Tax Act and Companies Income Tax Act) with a single, unified system.1Whether you are a salary earner, an entrepreneur, or a company owner, here is how to calculate your new tax liability.

Part 1: For Individuals (Salary Earners & Entrepreneurs)

The biggest headline is theremoval of the Consolidated Relief Allowance (CRA)—the roughly 20% relief you used to get automatically.2 In exchange, the tax bands have been widened, and lower income earners pay less (or nothing).3

Step 1: Determine Your "Chargeable Income"

Under the new law, your taxable income is yourGross Income minus Allowable Deductions.

Gross Income: Salary, wages, business profits, etc.
New Deductions:Pension Contribution: (Standard 8% employee contribution remains deductible).4Rent Relief (New!): You can now deduct 20% of your annual rent paid, capped at a maximum of ₦500,000Note: The old "CRA" (₦200k + 20% of gross income) is abolished.6Pension Contribution: (Standard 8% employee contribution remains deductible).4Rent Relief (New!): You can now deduct 20% of your annual rent paid, capped at a maximum of ₦500,000Note: The old "CRA" (₦200k + 20% of gross income) is abolished.6
- Pension Contribution: (Standard 8% employee contribution remains deductible).4
- Rent Relief (New!): You can now deduct 20% of your annual rent paid, capped at a maximum of ₦500,000
- Note: The old "CRA" (₦200k + 20% of gross income) is abolished.6

Step 2: Apply the New "Progressive" Tax Bands

Once you have your chargeable income (Gross Income minus Rent/Pension), you apply the new 2026 tax rates. The system is progressive, meaning you calculate it slice-by-slice.Income Slice (Annual)Old RateNew 2026 RateFirst ₦800,0007%0% (Tax Free)Next ₦2,200,000(₦800k - ₦3m)11% - 15%15%Next ₦9,000,000(₦3m - ₦12m)19% - 21%18%Next ₦13,000,000(₦12m - ₦25m)21% - 24%21%Next ₦25,000,000(₦25m - ₦50m)24%23%Above ₦50,000,00024%25%

Example Calculation

Scenario: You earn ₦6,000,000 (6 Million) per year and pay ₦1,500,000in rent.

Deduct Rent Relief: 20% of ₦1.5m = ₦300,000. (This is below the ₦500k cap, so you deduct the full ₦300k).
Deduct Pension (Est. 8%): ₦480,000.
Taxable Income: ₦6,000,000 - ₦300,000 - ₦480,000 = ₦5,220,000.

Now, apply the bands:

1st ₦800,000: @ 0% = ₦07
Next ₦2,200,000: @ 15% = ₦330,0008
Remaining ₦2,220,000: (₦5.22m - ₦3m) @ 18% = ₦399,600
Total Annual Tax: ₦729,600 (Approx. ₦60,800/month).

Part 2: For Companies (Business Owners)

The new law simplifies company taxes by categorizing companies by size (Turnover).

Step 1: Check Your Turnover Threshold

Are you a "Small Company"?

New Definition: A small company is one with an annual gross turnover of ₦50 Million or less (increased from the previous ₦25m, though some earlier drafts proposed ₦100m, the enacted law settles at ₦50m).10
Benefit: Small companies are Exempt (0%) from Companies Income Tax (CIT) and the new Development Levy.

Step 2: Know Your Rate (If not "Small")

If your turnover is above ₦50 Million:

CIT Rate: The Corporate Income Tax rate remains at 30% for large companies.Note: There is a provision allowing the government to reduce this to 25% in the future, but for now, calculate using 30%.Note: There is a provision allowing the government to reduce this to 25% in the future, but for now, calculate using 30%.
- Note: There is a provision allowing the government to reduce this to 25% in the future, but for now, calculate using 30%.
Development Levy (New): This replaces the Tertiary Education Tax (TET) and IT Levy.13 It is a flat 4% on assessable profits.
Capital Gains Tax (CGT): Increased to 30% for companies (aligned with the CIT rate).

Part 3: Other Critical Changes to Watch

1. Value Added Tax (VAT)

Rate: Remains at 7.5%.
The Good News: You can now claim Input VAT on all business purchases (including assets and services), which was previously restricted.16
Zero-Rated Items: The list of goods with 0% VAT has expanded to include more basic food items, medical supplies, and educational materials.17

2. Digital & Remote Work

Global Income: The law explicitly clarifies that Nigerian residents are taxed on worldwide income.18 If you live in Nigeria but work remotely for a US/UK company, that income is fully taxable in Nigeria under the new PIT bands.
Crypto/Digital Assets: Gains from digital assets are now explicitly taxable as Capital Gains.

3. Minimum Tax Abolished (For Individuals)

Previously, if you had no taxable income due to high reliefs, you still had to pay a "Minimum Tax" of 1%.20This is abolished. If your income falls below the taxable threshold (₦800k), you pay zero.

Summary Checklist for 2026 Readiness

[ ] Employees: Check if your HR has updated their payroll software for the Jan 2026 bands. Prepare your rent receipts to claim the new relief.
[ ] Business Owners: If your turnover is near ₦50m, review your accounts. Staying under ₦50m keeps you tax-exempt.
[ ] Investors: Be aware that Capital Gains on selling shares (above ₦150m volume) will be taxed at your personal income tax rate, not a flat 10%.

How to Know Your Tax Under the New 2026 Nigerian Tax Laws