Nigeria's 2026 Tax Changes Explained

Updated 7 November 2026 · About an 8-minute read

Nigeria's tax rules changed on 1 January 2026, when the Nigeria Tax Act 2025 took effect. If your take-home pay looks different, or you're not sure what you, your business or your staff should pay, this guide explains the new rules in plain language, with worked examples.

1. What changed in 2026

• The first ₦800,000 of taxable income each year is tax-free.
• The old Consolidated Relief Allowance (CRA) is gone. Tenants get a new rent relief instead.
• New progressive tax bands run from 0% to 25%.
• Small companies now pay 0% company income tax. Other companies pay 30% plus a new 4% development levy.

2. The new personal income tax bands

The rates apply in steps. Earning ₦5m a year doesn't mean you pay 18% on all of it: you pay 0% on the first ₦800,000, 15% on the next ₦2.2m, and 18% only on the part above ₦3m.

3. What you can deduct before tax is calculated

Your taxable income is your gross income minus allowable deductions, such as:

• Pension contributions, usually 8% of basic salary + housing + transport
• National Housing Fund (NHF) contributions
• NHIS (health insurance) contributions
• Life assurance premiums and interest on a home loan for the house you live in
• Rent relief: 20% of the annual rent you pay, up to ₦500,000

Keep your payslips, receipts and tenancy agreement, because you need proof to claim these.

4. Worked examples: how much will you pay?

Assumptions: monthly salary, pension of 8% of gross pay, no other deductions. Your real figures depend on how your salary is structured.

Step by step for ₦300,000 a month:

1. Annual gross pay: ₦300,000 × 12 = ₦3,600,000
2. Less pension (8%): ₦288,000, so taxable income is ₦3,312,000
3. First ₦800,000 at 0% = ₦0
4. Next ₦2,200,000 at 15% = ₦330,000
5. Remaining ₦312,000 at 18% = ₦56,160
6. Total tax: ₦386,160 a year (₦32,180 a month)

5. Do you rent? Claim rent relief

Take the same ₦300,000 salary and add ₦1,200,000 a year in rent:

• Rent relief = 20% × ₦1,200,000 = ₦240,000
• Taxable income falls to ₦3,072,000
• Tax falls to ₦28,580 a month, a saving of ₦43,200 a year

Many tenants never claim it. Ask your HR or payroll team how to submit your tenancy agreement or rent receipts.

6. Freelancers and remote workers paid from abroad

If you live in Nigeria and are paid by foreign clients or employers, the new law treats you as a resident taxed on your worldwide income. Your foreign earnings are converted to naira and taxed with the same bands, on your income after business expenses.

Already paid tax abroad? It can reduce your Nigerian tax, but only up to the Nigerian tax on that income, and you need proof of payment. Residency rules also changed under the new law. If you're unsure whether you count as resident, ask a tax professional.

7. Self-employed people and companies

• Self-employed people and sole proprietors pay the same personal income tax bands, but on profit (income minus business expenses), not on total sales.
• Small companies (turnover up to ₦100m, fixed assets under ₦250m, and not providing professional services) pay 0% company income tax and no development levy. They must still file returns.
• Other companies pay 30% company income tax plus a 4% development levy on assessable profit. The levy replaces the old tertiary education tax and several other levies.

8. For employers: getting monthly PAYE right

Employers must deduct PAYE from every employee's pay each month and remit it to the State Internal Revenue Service where each employee lives. Under the new bands, the tax depends on each person's pay, pension, NHF and reliefs, so doing it by hand for a whole team is slow and error-prone, especially when staff join or leave during the year or get a pay rise.

Our Employer PAYE Schedule works with your payroll file as it is, in any Excel or CSV layout. It calculates every employee's PAYE using the year-to-date (cumulative) method, gives totals and a summary by state, and downloads as Excel or PDF. Your payroll never leaves your computer. Your first month is free, then it's ₦25 per employee per payroll month.

9. Quick questions

Is the first ₦800,000 tax-free for everyone?
Yes. Under the Nigeria Tax Act 2025, the first ₦800,000 of taxable income each year is taxed at 0%.

When did the new tax rules start?
1 January 2026.

Does rent relief apply if I own my house?
No. Rent relief is for tenants who pay rent: 20% of annual rent, up to ₦500,000. Homeowners may be able to deduct interest on a home loan for the house they live in instead.

Do freelancers in Nigeria pay tax on income from foreign clients?
Nigerian residents are taxed on their worldwide income, including payments from foreign clients and employers. Tax already paid abroad on that income can be credited, but only up to the Nigerian tax on it and with proof of payment.

Work out your own figures

See your total tax free in seconds with our calculator, for salary earners, freelancers, the self-employed and companies.

This guide is general information, not tax advice. Figures are estimates based on the Nigeria Tax Act 2025, and individual situations vary. For official filing, consult the Nigeria Revenue Service, your State Internal Revenue Service or a tax professional. ProjectFirm is independent and not affiliated with or endorsed by the Nigeria Revenue Service or any State Internal Revenue Service.