Understanding
Nigeria’s New Income
Tax Regime:
What it Means for Employees,
Business Owners, SMEs, Corporate
Entities and the Wider Economy
I igeria has entered a new phase of tax administration following the 1 ^1 Federal Government’s approval of a revised personal income tax
structure, effective January 2026. The reform is part of a broader effort by the Tinubu administration to strengthen fiscal capacity, improve revenue mobilisation and reduce the overreliance on volatile oil proceeds. For professionals across sectors including banking, the changes introduce a
Personal Income Tax (PIT) Provisions
■ Low-income earners’ exemption: Individuals earning N800,000 or less
annually are exempt from PIT.
■ Rent relief: 20% of annual rent paid subject to a maximum of N500,000,
whichever is lower, has replaced the Consolidated Relief Allowance.
■ Global income taxation: Income, gains or profits of a Nigerian resident
are considered to accrue in Nigeria and are taxed as such, regardless of
where they arise and whether or not the income, profits or gains have been brought into or received in Nigeria while non-residents are taxed on Nigerian-sourced income. The NTA also provides relief for income that has already been taxed outside the country but is chargeable in Nigeria.
■ Progressive tax bands: The PIT regime has revised income brackets and
rates, with a higher marginal rate for the higher income earners.
■ Compensation for loss of office: The threshold for exemption from
chargeable gain from compensation for loss of office or employment has been increased from N10 million to N50 million.
PITA (Old rate)
Annual Taxable Income (NGN) Rate
First NGN 300,000 7%
Next NGN 300,000 11%
Next NGN 500,000 15%
Next NGN 500,000 19%
Next NGN 1,600,000 21%
Above NGN 3,200,000 24%
NTA PAYE RATE
Annual Taxable Income (NGN) Tax Rate
First N800,000 0%
Next N2,200,000 15%
Next N9,000,000 18%
Next N 13,000,000 21%
Next N25,000,000 23%
Above N50, OOP, OOP 25%
What Has Changed?
The new regime restructures personal income tax bands to reflect current earnings realities and broaden the taxable base. The first segment of annual income up to N800,000 remains fully exempt, which protects lower-income earners.
Subsequent income tiers attract graduated rates that rise with higher earnings. By design, this structure ensures that tax obligations increase only as income rises, making the system more equitable.
The revised bands introduce moderate upward adjustments in rates for higher brackets. Income between N800,000 and N3 million is taxed at 15%, while the band between N3 million and N12 million attracts 18%.
Earnings above N12 million move into higher progressive tiers.
This approach is common in advanced and emerging economies and is aimed at strengthening Nigeria’s fiscal space while preserving fairness.
How It Affects Salaries
For staff members, the reform means that monthly deductions will now align more closely with earnings levels. Entry-level professionals fall within the lower tax segments and experience relatively modest monthly deductions, while mid-level and senior executives will observe higher tax obligations due to their placement in the upper bands.
Typical scenarios illustrate this progression clearly. An annual income of N1.8 million attracts tax only on the share above the exempt threshold, producing a manageable annual tax bill. By contrast, a total annual earning of N6 million pushes the taxpayer into multiple brackets, resulting in a higher cumulative tax obligation.
Senior-level incomes follow the same graduated pattern, but with additional tiers reflected in the calculation.
The reform is designed to maintain predictability. The progression avoids sudden jumps, ensuring that employees in similar categories bear comparable tax burdens. Importantly, the updated system preserves various allowable deductions that help reduce taxable income.
Pension contributions, National Housing Fund deductions, health insurance premiums and parts of annual rent remain valid reliefs
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Why This Matters for the Economy
Beyond individual pay slips, the reform supports the Federal Government’s wider objective of enhancing non-oil revenue. Nigeria’s tax-to-GDP ratio remains significantly below that of peer economies, limiting the ability of government to fund infrastructure, social services and investment in productive sectors.
A more efficient and progressive personal income tax framework broadens the revenue pool and strengthens fiscal resilience.
For the banking industry, a more predictable tax system contributes to macroeconomic stability. Improved public revenues can support fiscal consolidation efforts, shape investor confidence and sustain better credit conditions.
Institutional planning also benefits from clarity in payroll-associated
costs, enabling HR and finance teams to forecast compensation budgets more accurately.
What Employees Should Keep in Mind
As implementation begins, employees may observe adjustments in monthly take-home pay. These changes reflect the updated brackets rather than an increase in the nominal tax rate.
Staff members are encouraged to review their allowable deductions to ensure they fully utilise legitimate reliefs provided by law. Pension contributions and NHF deductions remain meaningful tools that reduce taxableincome while contributing to long-term financial security.
Overall, the reform aims to modernise Nigeria’s tax system and align it with the needs of a dynamic economy.
By adopting a progressive structure that balances equity with fiscal responsibility, the government is signalling a shift toward a more sustainable revenue model.
For Business Owners, SMEs and Corporate Entities
The NTA 2025 introduces comprehensive reforms for corporate taxation, business structures, profits, gains, and compliance frameworks.
Key changes include:|
Company Income Tax (CIT) & Classification of Businesses
The Act defines a new “srnaH company”category. Businesses whose annual
exceed N250 million) qualify for full exemption from CIT, Capital Gains Tax (CGT), VAT and development levy.
For companies outside the small-company threshold, the standard Corporate Income Tax rate of 30% applies.
Electronic Money Transfer Levy (EMTL):
NTA 2025 renames EMTL as Stamp Duties and shifts liability of paying the N50 from the receiver to the sender.
Consolidated Development Levy
(Replacing Multiple Levies)
The reform consolidates several prior levies such as Tertiary Education Tax, IT Levy, NASENI Levy into a single 4% Development Levy on assessable profits for companies (excluding those exempt under “small company” rules).
This simplification streamlines compliance and reduces administrative burdens, while ensuring companies contribute to nation-building obligations in a transparent manner.
Capital Gains Tax (CGT) Provisions
Capital gains tax increase:The CGT rate for companies is increased from 10% to 30%, while CGT rate of individuals is based on their taxable income band.
Disposal proceeds from sale of shares under N150 million and chargeable gain not exceeding N10 million is exempted from CGT. Reinvested proceeds in Nigerian companies are also exempted from CGT.
VAT and Incentives
Full input VAT recovery: Businesses can recover input VAT paid on both services and capital assets.
Expanded zero-rated items: More essential goods and services are zero-rated, allowing businesses to recover input VAT. These are basic food items, medical and pharmaceutical products, educational books and
materials, fertilizers, locally produced agricultural
chemicals, electricity generation and distribution, exported goods, tuition fees among others.
Economic Development Incentive (EDI): This new incentive replaces the “pioneer status” tax holiday and
offers a tax credit for qualifying capital expenditure.
E-invoicina (Electronic Fiscal Svstem. EFS): Introduces a mandatorv
Electronic Fiscal System (EFS)forallVAT-registered businesses for real-time transaction recording and reporting, designed to improve transparency and reduce fraud.
■ Fossil Fuel Surcharge: The NTA imposed a 5% surcharge on most fossil
fuels, which will be added at the point of sale for products like petrol
and diesel.This new levy harmonizes previous road maintenance charges and, potentially, encourages a shift away from fossil fuels. Exemptions include household kerosene, cooking gas (LPG), and compressed natural gas (CNG). The Federal Minister of Finance is expected to issue an order to officially set the commencement date.
Nigeria Tax Administration Act
■ Reinforces mandatory Tax identification number: Individuals and
business must register for Tax with the relevant tax authority and obtain
Tax ID to carry out financial transactions. Banks, insurance companies, stockbrokers and other financial institutions are required to ensure that every taxable person provides Tax ID. Subsequent statement of the FIRS is that owners of account will not be stopped from operating their accounts.
■ Reporting large transactions: Banks and financial institutions are
now required to provide tax authorities with quarterly reports on
customers with cumulative inflows or outflows exceeding N25 million for individuals and N100 million for corporations.
Joint Revenue Establishment Act.
■ Independent Tax Ombud: The tax ombud is established to handle
taxpayers’ complaints relating to taxes, levies, complaints against tax
authorities and their officials among others.The body also monitors government’s arbitrary policies and advises the National Assembly.
■ Harmonization of Tax Administration: The Act promotes collaborative
efforts between federal and state tax agencies, minimizing duplication,
reducing tax conflicts, and improving enforcement consistency.
Why This Reform Matters:
Broad Strategic Significance
The 2025 tax overhaul reflects a shift toward a more transparent, efficient, and equitable tax regime. Key aims include:
■ Strengthening non-oil revenue to reduce Nigeria’s dependence on oil
Encouraging formalization of businesses, especially SMEs by reducing tax
burdens and simplifying compliance.
■ Aligning Nigeria with global tax standards, especially regarding
multinational enterprises, digital economy taxation, and minimum
effective tax rules.
■ Providing workers, professionals and business owners with a more
predictable tax climate facilitating better financial planning, investments,
and long-term growth.
For Zenith Bank, given its role in corporate and retail banking, SME financing, investment banking and advisory, this reform offers opportunities. The bank can position itself as a partner for clients navigating the new tax environment, helping them optimise tax liabilities, access incentives and ensure compliance.
FREQUENTLY ASKED
QUESTIONS
The New Tax Acts and Tax ID: What You Need to Know
TheNigeriaTax Administration Act (NTAA)mandatestheuseofTaxldentification Numbers(TaxlD)forcertaintransactions.Understandably, many Nigerians have questions about what this means for banking, businesses, and everyday life. This FAQ provides answers, clarifies misconceptions, and highlights the safeguards in place to protect citizens while ensuring a fairer, more transparent tax system.
- 1. Is it true that everybody must obtain a Tax ID
before opening or continuing to operate a bank account?
Yes, but with some clarifications. Section 4 of the NTAA requires all taxable persons to register with the tax authority and obtain a Tax ID. A “taxable person” is someone who carries on trade, business, or other economic activity to earn income. Banks and other financial institutions are required to request a Tax ID from taxable persons. Individuals who do not earn income and are not taxable persons are not required to obtain a Tax ID.
- Is this requirement new?
No.This is not a new policy. It has been in place since the Finance Act, 2019, which amended section 49 of the Personal Income Tax Act. Since January 2020, individuals opening a business account have been required to provide a Tax Identification Number (TIN).
The NTAA only strengthens and harmonizes this requirement.
- Why does the new law say’Tax ID’instead of TIN?
“Tax ID” is a term that unifies the different TINs issued by the
Federal Inland Revenue Service (FIRS), Joint Tax Board (JTB),
and State IRS. Ultimately, your NIN (for individuals) and CAC RC number (for companies) will serve as your Tax ID, reducing
duplication and simplifying compliance.
- If I already have a TIN, do I need a new Tax ID?
No. Your existing TIN remains valid. If you already have one, you do not need to register again. For those without a TIN, you will need your NIN (individuals) or CAC registration documents
(companies) to process your Tax ID.
- Will I need to queue for biometrics to obtain a Tax
ID card?
No. The Tax ID is simply a unique number linked to your identity, not necessarily a physical card. To obtain it, you can visit the nearest FIRS, State IRS, or JTB office, or apply online via their official websites.
It is free of charge. Please do not patronise touts or unofficial agents.
- Does the Tax ID requirement also apply to
businesses?
Yes. For unincorporated businesses, your personal TIN/Tax ID is sufficient. For companies, NGOs, incorporated trustees, and
other registered entities, a TIN will be automatically generated with your CAC registration details. If your business was
registered without a TIN in the past, simply visit the FIRS or apply online with your CAC documents to get one.
- What about Nigerians in the diaspora?
Nigerians abroad can obtain a Tax ID using their NIN for banking
or investment purposes in Nigeria. A simplified process has been
introduced for diaspora Nigerians. Visit the NIMC website for details.
- Do foreign companies and non-resident entities
need a Tax ID?
Yes, if they do business in Nigeria. A non-resident company
supplying goods or services to Nigerian customers must register
for a Tax ID. However, those earning only passive income (dividends, interest, royalties, rent) may not need to register, though they must provide relevant information. A company registered abroad but
effectively managed or controlled in Nigeria is treated as resident and must comply.
- Are government-owned enterprises and agencies
exempt?
No. Section 5 of the NTAA requires all ministries, departments, agencies, and government-owned enterprises (federal, state, or local) to register for tax and obtain a Tax ID.
- What happens if a taxable person does not
register by 1 January 2026?
The Act states that a person engaged in banking, insurance,
stockbroking or other financial services in Nigeria shall ensure that every taxable person provides a Tax ID and it introduces a penalty of N5m for awarding contracts to individuals or entities that are not registered for tax.
- How will this benefit ordinary Nigerians?
The aim is to simplify identification, reduce duplication,
and close loopholes that allow tax evasion. For most individuals and businesses, their NIN or CAC RC number will serve as their Tax ID
with no extra paperwork. This ensures fairness so that everyone who earns taxable income contributes their share protecting low-
income citizens who are not taxable.