New Tax Law in Nigeria: What It Means for You

The Federal Government has signed into law a new tax reform that will take effect from January 1, 2026. The law, called the Nigeria Tax Act, 2025, brings big changes to how individuals, companies, and small businesses will pay tax in the country.

Anyone earning ₦800,000 or less in a year will no longer pay Personal Income Tax.

This is good news for many Nigerians, especially market women, artisans, junior workers, and those in the informal sector.

The old Consolidated Relief Allowance has been scrapped.

Instead, taxpayers can now claim up to ₦500,000 or 20% of their rent as tax relief.

But those who own their houses or live in family property may not enjoy this benefit.

Nigerians earning ₦50 million and above annually will now pay as much as 25% in income tax.

The government says this is to make the rich contribute more to national development.

Small companies with yearly turnover of ₦100 million or less are now free from Company Income Tax, Capital Gains Tax, and the new Development Levy.

Big companies must now pay at least 15% minimum effective tax, even if they try to use loopholes to reduce their tax.

A new 4% Development Levy has been introduced on company profits, replacing many smaller levies.

VAT stays at 7.5%, but more items are now zero-rated (no VAT). These include foodstuff, medicines, textbooks, and electricity.

Businesses can now recover VAT fully on services and equipment they buy.

All businesses will also start using electronic invoicing from 2026 to reduce cheating and improve transparency.

The proposed 5% fuel surcharge has been postponed due to the rising cost of living.

The 4% import levy on certain goods has also been suspended for now.

Workers & Salary Earners: Many Nigerians on small salaries will stop paying tax, but those in higher brackets will pay more.

Tenants: Rent payers will enjoy some relief.

Small Business Owners: Many small shops, traders, and startups will benefit from the exemptions.

Big Corporations: Large businesses and oil companies will shoulder more of the tax burden.

The new law also changes how VAT is shared:

55% goes to states,

35% to local governments,

and only 10% to the Federal Government.

This means states like Delta and local councils in Kwale should expect more money to fund roads, schools, and community projects—if the money is properly managed.

Know your tax status – check if you fall under the ₦800k exemption or not.

Keep records of rent payments – receipts and agreements will help you claim rent relief.

Small business owners – prepare to use electronic invoices and proper bookkeeping.

Ask questions – don’t wait until the law catches you unawares.

The 2025 Tax Reform is the biggest change to Nigeria’s tax system in decades. While it removes the burden on low-income Nigerians, it asks the rich and big businesses to pay more. Whether this truly benefits ordinary citizens will depend on how government uses the extra money.

Kwale Post will keep following this story to explain how the new law affects Nigerians.