Nigeria Tax Act 2025: The Complete Guide to What Changed
Introduction
The Nigeria Tax Act 2025 represents the most significant overhaul of Nigerian taxation in decades. Effective January 1, 2026, these reforms aim to simplify tax administration, reduce the burden on low-income earners, and broaden the tax base.
Key Changes at a Glance
1. New Personal Income Tax Brackets
The most celebrated change is the introduction of a 0% tax bracket for the first ₦800,000 of annual income. This effectively exempts minimum wage earners from income tax.
| Income Band | Old Rate | New Rate |
|---|---|---|
| First ₦800,000 | 7% | 0% |
| Next ₦2,000,000 | 11% | 15% |
| Next ₦2,400,000 | 15% | 18% |
| Next ₦5,000,000 | 19% | 21% |
| Next ₦30,000,000 | 21% | 23% |
| Above ₦40,200,000 | 24% | 25% |
2. Simplified Consolidated Relief Allowance (CRA)
The old system of multiple reliefs (personal allowance, housing, transport, etc.) has been replaced with a single Consolidated Relief Allowance:
- **₦200,000** base allowance, OR
- **20% of gross income** (whichever is higher)
Plus 20% of gross income for pension relief.
3. Corporate Income Tax Changes
Small companies get significant relief:
- **₦0-50M turnover**: 0% CIT (was 20%)
- **₦50M-100M turnover**: 20% CIT
- **Above ₦100M turnover**: 30% CIT
4. VAT Input Credit Expansion
Previously, businesses could only claim input VAT on goods. Now, input VAT on services and capital assets is also claimable. This is a massive win for service-based businesses.
What This Means for You
If You're an Employee
If you earn ₦800,000 or less annually (about ₦66,667/month), you now pay zero income tax. For higher earners, the simplified CRA calculation means less paperwork and more predictable deductions.
If You're a Business Owner
Small businesses with turnover under ₦50 million are now completely exempt from CIT. This should free up capital for growth and hiring.
If You're Self-Employed
The new system treats self-employed individuals more fairly, with the same CRA benefits as employees. Plus, you can now claim input VAT on professional services.
Implementation Timeline
- **January 1, 2026**: Act becomes effective
- **Q1 2026**: FIRS to release implementation guidelines
- **2026 Tax Year**: First filing under new rules
Conclusion
The Nigeria Tax Act 2025 is broadly taxpayer-friendly. Most Nigerians will see their tax burden decrease, and the simplified calculations make compliance easier. Use our PIT Calculator to see exactly how these changes affect you.
TaxHQ Editorial
Expert tax content based on Nigeria Tax Act 2025 and insights from leading Nigerian tax professionals.