Nigeria’s reformed tax laws officially took effect on Thursday, January 1, 2026. It’s the most comprehensive overhaul to the country’s tax system in decades. 

On June 26, 2025, President Bola Ahmed Tinubu signed four major tax reforms into law, reshaping many aspects of our tax system, from how much we pay to what we pay taxes on to how they are remitted.

For salaried workers, these reforms will affect your take-home pay. For business owners, they’ll impact your bottom line and tax obligations. And for investors, they’ll shape your decisions on everything from savings accounts to asset sales. Understanding these changes is now essential for anyone who wants to build and protect wealth in Nigeria. This guide breaks down exactly what’s changing, what it means for your money, and how to prepare. 

Before we dive into the changes, let’s start with the basics.

What exactly are taxes?

Taxes are mandatory contributions that individuals and businesses pay to the government whenever they earn income, purchase goods and services, or make transactions such as bank transfers. 

These funds are used to support public infrastructure, such as schools, hospitals, roads, and other services that enable daily life.

What was wrong with the old tax system?

Nigeria’s previous tax system had fundamental problems that needed fixing:

• Many got away with not paying taxes altogether, especially those earning income from newer sources, such as digital assets (for example, crypto trading, freelancing, and digital content creation). 
• The taxing system was not evenly distributed, so many low-income earners paid nearly the same tax rate as high-income earners. This put disproportionate pressure on those who could least afford it.
• The framework was outdated. Much of Nigeria’s tax law was inherited from colonial rule and hasn’t kept pace with our current system of government, work, and finances.
• There were too many separate and conflicting laws, each with its own rules, forms, and contradictions.

To address these issues and make the system fairer, unified, and more efficient, the government introduced the Tax Reform Acts 2025.

Meet the new acts:

The Nigerian Tax Acts 2025 are anchored in four major components, which have now been signed into law: the Nigeria Tax Act (NTA), the Nigeria Tax Administration Act (NTAA), the Nigeria Revenue Service Act (NRSA), and the Joint Revenue Board Act (JRBA).

• The Nigeria Tax Act (NTA) defines what gets taxed, who owes tax, and at what rates taxes are paid. This act consolidated all the tax laws into a unified framework, making it easier to understand and follow.
• The Nigeria Tax Administration Act (NTAA) establishes how taxes are collected and enforced, standardising the process across federal, state, and local governments, and eliminating the confusion that comes with multiple taxation.
• The Nigeria Revenue Service Act (NRSA) establishes the body responsible for collecting taxes. This creates a new, modern National Revenue Service that uses data and technology to make tax collection more transparent and efficient.
• The Joint Revenue Board Act (JRBA) establishes how tax agencies work together. This improves coordination between different levels of government and reinstates the Tax Appeal Tribunal, where you can challenge unfair tax decisions.

What is changing for you? 

If you are employed, own a business, or invest, here are some key changes you need to note: 

1. The first ₦800,000 each year is now completely tax-free

If you earn ₦800,000 or less annually, you will pay zero personal income tax. Anything above that amount may be taxed at your applicable tax bracket.

2. A new progressive tax structure

Under the old proportional/flat tax system, everyone was taxed at roughly similar rates, regardless of income. The new tax rate system is progressive, meaning that people who earn more money pay a higher percentage of their income in taxes.

Your Annual Income	Tax Rate
First ₦800,000	0% (no tax)
₦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%

What this means:

• Low-income earners are exempted from most taxes.
• Most middle-income earners get slight relief. 
• High earners contribute marginally more.
  

3. Tax residency rules are clearer (and better enforced)

Under the old rules, it was somewhat vague when exactly someone became a Nigerian tax resident. The new rules make this crystal clear.

You will be considered a Nigerian tax resident if:

• You live or have a permanent home in Nigeria.
• You spend 183 days or more in Nigeria.
• You have strong economic or family ties in Nigeria.
• You work as a Nigerian diplomat or public servant abroad.

Tax residents are taxed on their worldwide income, not just their Nigerian income. So if you work abroad but your family lives in Lagos, you may now be liable to pay tax in Nigeria on your foreign salary.

4. Rent relief for tenants 

Unlike in the old tax system, 20% of your annual rent (capped at ₦500,000) is now deductible from your taxable income. This means if you pay ₦2 million in rent annually, you can deduct ₦400,000 from your taxable income. But if your rent is ₦3 million, your deduction is capped at ₦500,000, even though 20% would have been ₦600,000.

Note: You should keep your rent receipts as proof. Other tax deductions, such as pension and insurance contributions, still exist, but must be claimed independently. 

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5. Capital Gains Tax (CGT) is now integrated with Income Tax 

This is a significant change for investors and asset owners. Under the old system, Capital Gains Tax (the tax on profits from selling assets such as land, stocks, or cryptocurrencies) was taxed at a flat 10% rate for individuals.

The new system treats your capital gains as part of your regular income, so they’re taxed under the progressive tax brackets above. Depending on your total income, this could result in higher taxes on investment profits. For companies, however, CGT rate has increased from 10% to 30%.

Items that are not taxable: 

• Your primary home (when sold).
• Up to two personal vehicles.
• Personal items worth less than ₦10 million.
• Asset sales on proceeds below ₦150 million and gains less than ₦10 million.
• Gifts received and inheritances.
• Retirement savings withdrawals. 
• Bonds interest & insurance payments.
• Stocks (until they are sold). 

Items that are taxable:

• Digital and virtual assets (including cryptocurrency). 
• Income from online ventures like YouTube, digital content creation, etc. 
• Gains (Profits) on assets worth above ₦10 million

For example, if you buy a house for ₦70 million and later sell it for ₦180 million, that’s a profit of ₦110 million. Since the gain is above ₦10 million, the ₦110 million profit is taxable. 

The same applies to crypto trading: if you buy Bitcoin for ₦5 million and later sell it for ₦15 million, you have made a ₦10 million profit, which is taxable.

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6. Small businesses’ tax exemptions expanded

Previously, only businesses with a total annual revenue of ₦25 million or less were eligible for tax breaks. The new threshold is more generous. Now, any business with annual revenue of up to ₦100 million a year and assets worth ₦250 million or less is considered a small company and won’t pay the Corporate Income Tax, Capital Gains Tax, or the new 4% Development Levy.

This is massive for small business owners, freelancers, and side hustlers. Before the expansion of the tax exemptions, a business with a monthly revenue of ₦8 million could owe the government up to ₦3-5 million yearly. Now they owe nothing, and the funds can be reinvested in inventory, hiring, or higher-end furniture.

A few things to note: 

• Professional service firms (accounting, consulting, legal) do not qualify as small companies regardless of their turnover.
• Companies that qualify for exemptions are still expected to file returns and keep proper records. 

7. Large companies must pay 15% minimum in taxes

Large companies with an annual turnover of ₦50 billion or more, or those part of multinational groups with global revenue above €750 million, must maintain a minimum effective tax rate of 15%. This means that, regardless of how many deductions or incentives they claim, they must still pay 15% of their net income in taxes.

8. Loss-of-employment compensation up to ₦50 million is tax-free

The tax exemption limit on compensation for redundancy, job loss, or injury has been increased from ₦10 million to ₦50 million. This is to offer even greater relief to individuals in such situations.

9. Value-Added-Tax (VAT) stays at 7.5% with a few adjustments

Although the VAT rate remains unchanged at 7.5%, items classified as zero-rated (the VAT rate applied to them is 0%) have been expanded to include basic food, educational materials, baby products, and medical supplies.

What this means: 

• Items within this category will no longer attract VAT, and the government will refund any VAT businesses incurred in producing them. For example, Bread falls under zero-VAT items, but businesses incur VAT on transportation and raw materials to produce bread. When filing returns, businesses can submit receipts for these VAT payments to claim refunds. In theory, this should make essential items more affordable.
• Small companies (businesses with a turnover of less than ₦100 million) are also exempted from charging VAT.

10. The Development Levy replaces multiple levies

Before now, businesses had to deal with multiple sector-specific levies: the Education Tax, the National Agency for Science and Engineering Infrastructure (NASENI) levy, and the Information Technology levy, each with its own rules and paperwork. The reform consolidates these into a single levy, the Development Levy, charged at 4% of a company’s assessable profits.

Note: Small companies (annual turnover under ₦100 million) and non-resident companies are exempt from the development levy. 

11. One Tax ID, Nationwide Recognition

In the past, someone who lived in one state but owned property or ran a business in another could face different tax requirements in each place. The new reform changes that. Now, the tax you pay in your state of residence will identify you as a taxpayer across the entire country. The old Tax Identification Number (TIN) has been replaced with a Tax ID that works on a single, unified platform. 

What this means:

• Unified identification for all taxpayers
• No more multiple taxation across states.
• Easier compliance.
• The government can now better identify individuals and businesses that underreport income.
• As long as your funds pass through the banking system, you will be taxed for it.

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How to prepare for the new reforms: 

1. If you are an individual 

• Assess your tax situation: Review your current tax situation and see which tax band you will fall into under the new system. 
• Get your new Tax ID: The old Tax Identification Number (TIN) has been replaced with a new Tax ID. This Tax ID is linked to your 11-digit National Identification Number (NIN). To get yours, visit https://taxid.nrs.gov.ng/, enter your NIN, and click on Retrieve Tax ID. Follow the prompts and click Continue. Your 13-digit Tax ID will be displayed afterwards. 
• Keep track of your records: Keep payslips, invoices, rent receipts, and bank statements organised and easily accessible. Start tracking income and expenses digitally to make your tax filings easier.
• Take advantage of your tax-deductibles: Pension, housing fund, health insurance, and rent relief. 
• Update your information: Ensure your bank details and contact information are current with your employer.

2. If you own a business 

• Assess your business size: Calculate annual turnover and asset value to confirm if you qualify for small business exemptions. (Remember that businesses with less than N100 million annual turnover are exempt). 
• Update company registration: Verify that your CAC registration information is current and accurate.
• Implement digital invoicing: All VAT-registered businesses will implement e-invoicing. The first phase is for businesses with a turnover of ₦ 5 billion or more.
• Use compliant accounting software: This will make tracking and filing much easier.
• Get your new Tax ID: To get yours, visit https://taxid.nrs.gov.ng/ and click on the Corporate tab. Select the appropriate organisation type from the dropdown: Business Name, Company, Incorporated Trustee, Limited Partnership, and Limited Liability Partnership. Enter your Registered Company (RC) Number or Business Name (BN) Number and click Retrieve Tax ID. Your 13-digit Tax ID will be displayed afterwards
• Evaluate your structure: Consider whether operating as a sole proprietor, partnership, or limited company offers the best tax position for your business. 
• Claim all exemptions and allowances: Don’t leave money on the table, know what you can deduct and are entitled to claim. 
• Automate tax payments: Configure automatic payments or calendar reminders for tax deadlines to avoid government-imposed penalties.

How the new tax laws affect your Piggyvest savings

As a Piggyvest user, here’s one key thing you should know: Taxes will only apply to the interest your money earns, not your deposit.

The interest rates on the app remain gross rates (the rate before tax). To make this more transparent, when interest is paid, you’ll clearly see the following:

• Your total interest earned.
• The 10% tax deducted.
• The final amount credited to your wallet.

For example: If you earn ₦10,000 in interest, ₦1,000 goes to tax, and ₦9,000 is credited to you. Your savings balance, which is your principal, stays intact. 

Some important things are not changing:

• Government Bonds remain tax-free
• Insurance payouts remain tax-free
• Retirement savings, including contributions and withdrawals, stay tax-free

These protections are deliberate to encourage long-term investment and financial security.

While this is a regulation we must follow, our commitment to you hasn’t changed: to help you grow your wealth smarter, stay informed, and always know exactly what’s happening with your money.

The bottomline

Nigeria’s 2025 tax reform represents the most significant change to the country’s tax system in decades. Whether the changes benefit you depends largely on how well you understand and adapt to them.

The good news is that most Nigerians, especially low-income earners and small business owners, will actually pay less tax under this system. But to maximise these benefits, you need to stay organised, claim your rightful deductions, and plan strategically.

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