On 1 January 2026, Nigeria replaced most of its tax system in a single day. Four new laws — signed by President Bola Tinubu on 26 June 2025 — rewrote the rules for workers, small businesses, large companies and the tax authority itself. Ten months in, the new system is the one every Nigerian earner and every business in Africa’s most populous country now lives under. This is what changed, in plain numbers.
The four laws are the Nigeria Tax Act 2025, the Nigeria Tax Administration Act 2025, the Nigeria Revenue Service (Establishment) Act 2025 and the Joint Revenue Board of Nigeria (Establishment) Act 2025. The first of them does most of the work: it consolidates the old Personal Income Tax Act, Companies Income Tax Act, Value Added Tax Act, Capital Gains Tax Act, Petroleum Profits Tax Act and Stamp Duties Act into a single code.
Workers: the new income tax bands
Personal income tax is now charged on yearly taxable income in six bands:
| Yearly taxable income | Rate |
|---|---|
| First ₦800,000 | 0% |
| Next ₦2,200,000 (up to ₦3 million) | 15% |
| Next ₦9,000,000 (up to ₦12 million) | 18% |
| Next ₦13,000,000 (up to ₦25 million) | 21% |
| Next ₦25,000,000 (up to ₦50 million) | 23% |
| Above ₦50 million | 25% |
Each rate applies only to the income inside its band — a point worth stating plainly, because the top rate of 25% does not apply to a person’s whole income. Workers earning the national minimum wage (₦70,000 a month) pay no PAYE at all, and a new rent relief worth 20% of annual rent, up to ₦500,000, replaces the old consolidated relief allowance.
Worked out, the bands mean this. A worker with ₦5 million of taxable income pays nothing on the first ₦800,000, 15% on the next ₦2.2 million (₦330,000) and 18% on the remaining ₦2 million (₦360,000) — a total of ₦690,000, an effective rate of 13.8%. A worker with ₦12 million of taxable income pays ₦330,000 at 15% and ₦1.62 million at 18% — a total of ₦1.95 million, an effective rate of 16.25%. The system is more progressive than the one it replaced: the lowest-paid are out of tax entirely, and the effective rate rises gently with income rather than jumping.
Small businesses: 0% company tax
The biggest change for small firms is the new definition of a small company: a business with annual gross turnover of ₦100 million or less and total fixed assets of not more than ₦250 million, according to the Presidential Fiscal Policy and Tax Reforms Committee and PwC. Two versions of the Act are in circulation: an earlier FIRS gazette version gives ₦50 million, while the National Assembly’s Final Approved Copy, signed by the Clerk and the President, gives ₦100 million — and the signed copy is the law. Firms with turnover between ₦50 million and ₦100 million should still confirm their position in writing before relying on the 0% rate. The example below uses a company below either figure, so its conclusion holds on both readings. Such companies pay 0% company income tax, are exempt from capital gains tax and from the new development levy, and receive relief on VAT.
Take a trading company with ₦40 million turnover and ₦12 million profit. Under the old rules it was a medium company and paid 20% company income tax — ₦2.4 million on that profit — plus 3% tertiary education tax (₦360,000) and the 0.005% Police Trust Fund levy (₦600): about ₦2.76 million in all. Under the new Act it pays nothing on the profit — and no development levy either. That is the reform’s deliberate bet: that freeing small firms from tax will do more for jobs and formalisation than collecting from them.
Large companies, by contrast, pay 30% company income tax plus a 4% development levy on assessable profit. The levy replaces four separate charges — the Tertiary Education Tax (3%), the NITDA levy (1%), the NASENI levy (0.25%) and the Police Trust Fund levy (0.005%) — with a single charge. Capital gains for companies are now taxed at 30%, up from 10%, aligning the capital gains rate with the company tax rate. And companies with aggregate turnover of ₦50 billion and above face a minimum effective tax rate of 15%.
VAT stays at 7.5% — and who pays it changes
One proposal that did not survive the legislative process was a VAT increase. The rate stays at 7.5%. What changed is the base: basic food, medical and pharmaceutical products, books and educational materials are zero-rated, and businesses can now recover input VAT on services and fixed assets. Small companies benefit from VAT relief under the new administration rules.
The administration changed too. The Federal Inland Revenue Service has been renamed the Nigeria Revenue Service, reflecting a wider remit, and the new Tax Administration Act sets out how the system is run. The reform’s authors say the aim is a simpler system that raises more revenue from those who can pay, while taking the smallest earners and smallest firms out of tax altogether.
What it means beyond Nigeria
Nigeria’s reform matters beyond its borders because of the country’s weight: Africa’s most populous nation, with the continent’s largest market of consumers and small businesses. A 0% company tax rate for small firms is now one of the most generous thresholds in Africa, and it will be watched by finance ministries elsewhere — including Ghana, which is overhauling its own economy at the same time under its US$10 billion New Economy programme.
The open questions are practical, not theoretical. Small firms still have to register and file, even at a 0% rate, and the exemption is worth nothing to a business that cannot navigate the filing system. The development levy is new and will be tested in its first full year of collection. And the gap between the law as signed and the law as administered — the usual place where Nigerian tax reforms have stumbled — will only show up in the revenue numbers over the next two years. The rates are set. Whether the system works is still to be proved.
This article is general information, not tax advice. Check your position with the Nigeria Revenue Service or a qualified tax professional before acting on it.
Related reading: the cost of sending money to Africa, and how mobile money compares across Africa’s biggest markets. More in Business.
Frequently asked questions
When did Nigeria’s new tax laws take effect?
1 January 2026. The four Acts were signed into law on 26 June 2025 by President Bola Tinubu, and the Presidency confirmed in December 2025 that there would be no delay to the commencement date.
How much income is tax-free in Nigeria now?
The first ₦800,000 of yearly taxable income is taxed at 0%. Workers earning the national minimum wage (₦70,000 a month) pay no PAYE.
Do small companies pay tax in Nigeria now?
Qualifying small companies — turnover up to ₦100 million and fixed assets up to ₦250 million — pay 0% company income tax and are exempt from capital gains tax and the development levy, and receive VAT relief. They must still register and file. Professional-services firms are excluded from the small-business reliefs under the Tax Administration Act, and advisers generally treat them as excluded from the 0% company-tax rate too — but the Tax Act’s own small-company definition does not spell that out, so such firms should check before relying on it.
What is the VAT rate in Nigeria in 2026?
7.5%, unchanged. Basic food, medical and pharmaceutical products, books and educational materials are zero-rated.
