What’s the 2026 Nigeria Tax Reform About?

The Nigerian government, under the administration of President Bola Ahmed Tinubu, is carrying out a major cleanup of Nigeria’s tax system. For many years, the tax system has been messy, with duplicated taxes and confusing regulations. Taxpayers often found it difficult to understand what they were required to do. However, the 2026 tax reform has been passed into law to reorganize the entire system and make taxation seamless and fairer for everyone.

The tax reform has clear goals:

• Make taxation simple and seamless. Now, taxpayers do not need expert knowledge to understand their taxes and how they'll be paid.
• Taxation is now fairer, so the right people pay the right amount. The government doesn’t rely on a smaller group to fund everything. When more people share the responsibility, the tax burden on each individual can be lower and fairer overall.
• The tax reform has also gone fully digital to simplify the tax processes and reduce paperwork and queues. This helps to increase structural efficiency and convenience for taxpayers.

Tax for salary earners

If you're a salary earner, the most significant changes here are to the Personal Income Tax (PIT) system. Here's the simple breakdown you need to know about your tax filing:

• Clear exemption limit: If you earn an amount ranging from ₦0 to ₦800,000 every year, you will not be required to pay income tax. That’s instant breathing room for low-income earners, and the main reason people are saying this tax reform targets mostly the rich and wealthy individuals.
• Consolidated Relief Allowance (CRA): CRA is a tax benefit that reduces how much of your income is taxed. Before tax is calculated, the government allows you to subtract a fixed amount and a percentage of your income. However, targeted reliefs now replace CRA. Instead of a blanket allowance, you now get focused reliefs. For example, you can claim 20% relief on your rent (capped at ₦500,000).
• Exemptions and deductions: This refers to parts of a person’s income that are either not taxed at all or are removed before tax is calculated. These are included to protect low-income earners and reduce the overall tax burden by allowing certain earnings, allowances, or expenses to be excluded from taxable income. In other words, pension, housing, and health insurance contributions are fully deductible. The more you secure your future, the less you pay now.
• Electronic Money Transfer Levy (EMTL): This levy is now transferred exclusively to states as part of stamp duties. Small transfers are exempted, but large transfers may attract a small levy. Recently, the Federal Government shifted the responsibility for paying the ₦50 EMTL charge on transactions above ₦10,000 from the receiver to the sender.

Tax for businesses

If you run an SME, freelance, or manage a side hustle, the tax system now encourages you to grow without squeezing you dry. Here's the simple breakdown of how the tax reform policy affects business organizations and corporate companies:

• Corporate Income Tax (CIT): Businesses with turnover below ₦50 million annually now pay zero corporate tax. You are taxed on the income you earn, not on the assets you own. For instance, if you have one million naira in your current account, there is no taxable income. But if that ₦1M is moved to a savings account and earns 10% interest, you'll pay tax on the 10% interest earned, not the initial ₦1M.
• Value Added Tax (VAT): A value-added tax (VAT) or goods and services tax (GST) (general consumption tax (GCT)) is an indirect consumption tax levied on goods and services at every stage of the supply chain, from production to the point of sale. It is ultimately the final consumer who bears the entire tax burden, as businesses collect the tax on behalf of the government. However, this VAT still remains at 7.5%, but invoicing goes digital, making calculations automatic. Essentials like food, education, and healthcare remain VAT-free.
• Tax incentives: Sectors like tech, agriculture, and renewable energy get special breaks to encourage growth. For example, a tech startup in Lagos that builds a new payment app can apply for "Pioneer Status," which allows them to avoid paying corporate income tax for up to five years. This incentive lets the company keep all its early profits to hire more local engineers and grow faster.

Other good things you should know about the 2026 tax reform in Nigeria:

• FGN bonds and insurance interest and payments remain tax-free.
• Retirement savings, including contributions, growth, and withdrawals, are also still tax-free.
• Owning stock isn’t taxed, but selling the stock for profit attracts tax on gains.
• Rent relief attracts 20% off rent tax (up to ₦500,000) under targeted reliefs that were previously CRA.
• Gifts and inheritance are also not still taxable under the new tax reform in Nigeria.

However, to replace the old Federal Inland Revenue Service (FIRS) structure and functions that were previously used to manage and run taxation in Nigeria, the government has officially rebranded the agency to the Nigeria Revenue Service (NRS) with a new name, logo, and institutional corporate identity as part of the implementation of Nigeria’s new tax regime under the Nigeria Revenue Service (Establishment) Act, 2025.

We hope this message is clear and people can stop debunking rumors about the 2026 tax reform that became effective on January 1, 2026. To help stop the spreading of misinformation, kindly share this article to at least one of your social media pages so that it can reach more people who are carried away with the fear of increased financial burdens, ensuring they understand the actual benefits and incentives available to them.