Starting 1 January 2026, a package of 50 reliefs and exemptions will come into force, affecting personal income tax (PAYE), corporate taxes, VAT, capital gains, stamp duties, and more.
The goal: ease the tax burden on low- and middle-income earners; support small businesses; encourage investment, job creation, and formalisation of the economy.
PAYE / personal income tax: people earning the national minimum wage or below are exempt. Those with annual gross income up to ₦1.2 million will pay no tax.
For those earning above that threshold but below certain levels: a new reduced PAYE rate structure applies (exact bracket details will depend on implementing regulations).
Deductions and reliefs remain available: pension contributions, National Health Insurance (NHIS), National Housing Fund (NHF) contributions; interest on loans for owner-occupied homes; life insurance / annuity premiums; rent relief of 20% of annual rent (capped at ₦500,000).
Other exemptions: Gifts received by individuals; compensation for loss of employment up to ₦50 million; pensions, gratuities, and retirement benefits under the relevant pension law remain tax-exempt.
On “capital gains and property / asset sales” side: under the new rules, some sales / transfers may be exempt for example, sale of owner-occupied house, small personal effects (valued up to ₦5 million), sale of up to two private vehicles per year, and certain thresholds for gains on shares.
Small companies with turnover ≤ ₦100 million and fixed assets ≤ ₦250 million will pay 0% corporate income tax under certain conditions.
Eligible startups (as per government criteria) also qualify for corporate tax exemption.
Incentives for employment: employers who raise wages, give transport subsidies, or hire and retain new employees for at least 3 years get a 50% deduction called “compensation relief” & “employment relief.”
Agriculture sector for crop production, livestock, dairy etc get a 5-year tax holiday.
Small businesses are also exempted from certain levies, withholding taxes, and may have simplified VAT/stamp duty compliance if they fall under the turnover thresholds.
In short: the reforms aim to lighten the tax burden and compliance load for small businesses, agriculture players, startups encouraging formal business activity, investment, employment and growth.
The published summaries of exemptions/reliefs don’t yet include full implementation details (e.g., exact PAYE brackets, VAT-refund mechanics, compliance requirements). This means some uncertainty remains until implementing regulations are released.
Some reliefs currently referenced (like “compensation relief” or “employment relief” for salary/wage increases) appear according to the source law limited to the 2023–2025 period. It’s unclear whether they will carry forward beyond 2025 when the new regime starts.
The effectiveness depends heavily on proper implementation by tax authorities, clarity of guidance, and consistent application across Nigeria’s states otherwise, there’s a risk that intended benefits won’t reach ordinary citizens or small businesses.
Wider fiscal trade-offs: granting extensive exemptions and reliefs might reduce short-term government revenue — unless offset by broader base expansion, improved compliance, or other revenue measures.
If you earn a salary, check your payslip from January 2026 onward to confirm whether the new PAYE deductions (or exemptions) are properly applied, and ensure allowable deductions/reliefs (pension, rent, etc.) are accounted for.
If you own or operate a small business, verify whether your turnover and asset thresholds qualify for tax exemptions or zero-tax status before planning expansions or investments.
If you’re an investor or homeowner, consider how the exemptions on capital gains, property sale, small asset disposal might affect transactions especially when selling property, vehicles, or shares.
Keep an eye out for official directives from revenue authorities (and avoid relying solely on media summaries), because some important details and compliance procedures are still to be clarified.
The reforms as laid out by Mide Alabi represent one of the most comprehensive efforts yet to align tax policy with social equity, protection for vulnerable earners, and support for small business and formalisation. If implemented properly, they could reduce poverty-level tax burdens, encourage entrepreneurship, and stimulate investment in agriculture, MSMEs, and startups.
However as with many reforms the benefits will only materialise if there’s strong institutional capacity, clarity, transparency, and fair application across levels. Implementation and follow-through will be the real test.
Post a Comment
Leave a Reply