The Nigeria Tax Act 2025 represents the biggest overhaul of Nigeria's tax system in decades. Signed into law and effective January 1, 2026, it brings significant changes that affect almost every taxpayer in the country—mostly for the better.
In this guide, we'll break down the key changes in plain English, so you know exactly how the new law affects you.
What is the Tax Act 2025?
The Nigeria Tax Act 2025 is comprehensive tax reform legislation that modernizes Nigeria's personal income tax system. The goals of the reform include:
- Simplifying the tax system
- Reducing the burden on low and middle-income earners
- Introducing new relief measures
- Improving tax administration
- Broadening the tax base fairly
Let's look at the specific changes that matter to you.
New Tax Brackets
The most significant change is to the personal income tax brackets. Here's how they compare:
Old Brackets (Pre-2026)
| Income Range | Tax Rate |
|---|---|
| First ₦300,000 | 7% |
| Next ₦300,000 | 11% |
| Next ₦500,000 | 15% |
| Next ₦500,000 | 19% |
| Next ₦1,600,000 | 21% |
| Above ₦3,200,000 | 24% |
New Brackets (2026 Onwards)
| Income Range | Tax Rate |
|---|---|
| ₦0 - ₦800,000 | 0% |
| ₦800,001 - ₦3,000,000 | 15% |
| ₦3,000,001 - ₦12,000,000 | 18% |
| ₦12,000,001 - ₦25,000,000 | 21% |
| ₦25,000,001 - ₦50,000,000 | 23% |
| Above ₦50,000,000 | 25% |
Higher Tax-Free Threshold
Perhaps the biggest win for everyday Nigerians: the first ₦800,000 of annual income is now completely tax-free.
Previously, there was no true tax-free threshold—you started paying 7% from the first naira. Now:
- If you earn ₦800,000 or less annually, you pay ZERO income tax
- If you earn more, you only pay tax on the amount above ₦800,000
Example: Someone earning ₦1 million annually now only pays tax on ₦200,000 (the amount above ₦800,000), saving them tens of thousands of naira compared to the old system.
This is huge: Many low-income earners and small-scale traders are now effectively exempt from income tax, reducing their financial burden significantly.New Rent Relief
For the first time, Nigerian taxpayers can claim a deduction based on rent payments. This is completely new!
How it works:
- You can deduct 20% of your annual rent from taxable income
- Maximum deduction is capped at ₦500,000
- You must have documentation (tenancy agreement, receipts)
Example: If you pay ₦2 million in rent, you can deduct ₦400,000 from your taxable income. If you're in the 18% bracket, that saves you ₦72,000 in actual taxes.
Changes for Businesses
The Tax Act 2025 also includes changes for businesses:
Small Business Relief
- Businesses with turnover under ₦25 million get simplified compliance
- Reduced filing requirements for micro-businesses
Company Income Tax Adjustments
- Small companies (turnover ≤ ₦25M): 0% CIT
- Medium companies (₦25M - ₦100M): 20% CIT
- Large companies (> ₦100M): 30% CIT
Development Levy
A new development levy applies to large companies, used for infrastructure funding.
What Stays the Same
Not everything changed. These remain consistent:
- Pension contributions: Still deductible up to the existing limits
- NHF contributions: Still 2.5% for eligible employees
- NHIS contributions: Still applicable as before
- Filing deadline: Still March 31st each year
- TIN requirement: Still mandatory for all taxpayers
What You Should Do Now
With the new law taking effect January 1, 2026, here's what you should do:
1. Understand Your New Tax Situation
Use our tax calculator to see how your tax changes under the new system. Most people will pay less.
2. Start Tracking Rent Payments
If you rent, begin keeping records now. You'll want receipts and your tenancy agreement ready to claim rent relief.
3. Organize Your Records
Good record-keeping is more important than ever. Set up a system to track income and deductible expenses.
4. Update Your Tax Planning
If you're high-income, the new 25% top bracket means you might want to explore legal tax planning strategies.
5. Get Help If Needed
The changes are significant. If you're unsure how they affect you, consult a tax professional or use a tool like KeepAm.
The Bottom Line
The Nigeria Tax Act 2025 is largely good news for Nigerian taxpayers:
- ✅ Lower taxes for most people
- ✅ ₦800,000 tax-free threshold
- ✅ New rent relief up to ₦500,000
- ✅ Simpler bracket structure
- ✅ Support for small businesses
The best thing you can do now is understand how these changes affect your specific situation and prepare accordingly.
Ready to see your new tax?
Found this helpful? Share it with others
Have questions about this article? Email us at hello@keepam.ng