Thursday, October 22, 2026 | Nigeria Tax News
Nigeria’s new tax regime is expected to provide relief to millions of workers while increasing the tax burden on some high-income earners. The reforms, introduced under the Nigeria Tax Act, 2025, took effect on January 1, 2026, as part of the Federal Government’s efforts to establish a more progressive tax system.
The reported development highlights the potential benefits for low- and middle-income earners, alongside changes to the personal income tax structure that could result in higher tax liabilities for individuals earning substantially more.
Key Developments
Under the new tax framework, the first ₦800,000 of an individual's annual chargeable income is taxed at zero per cent. The revised structure is intended to reduce the tax burden on eligible low-income earners and provide relief to workers whose earnings previously attracted higher deductions.
The reforms also introduce a progressive personal income tax system, with rates increasing across successive income bands. The top rate is 25 per cent for annual chargeable income exceeding ₦50 million.
However, the reported figure of 1.7 million workers benefiting from tax relief should be distinguished from the number of workers who may qualify for lower tax deductions. The exact number of beneficiaries requires confirmation from the original report or an official government source.
What Taxpayers Need to Know
The new personal income tax framework provides for the following rates on successive portions of annual chargeable income:
- First ₦800,000: 0 per cent.
- Next ₦2.2 million: 15 per cent.
- Next ₦9 million: 18 per cent.
- Next ₦13 million: 21 per cent.
- Next ₦25 million: 23 per cent.
- Above ₦50 million: 25 per cent.
These rates apply progressively to the relevant portions of chargeable income, rather than the highest rate applying to an individual's entire income.
The reforms also introduce rent relief of 20 per cent of annual rent paid, capped at ₦500,000, subject to the applicable statutory conditions.
Employees should review their payslips to ensure that Pay-As-You-Earn (PAYE) deductions reflect the applicable tax bands and eligible reliefs. Employers, in turn, should update their payroll systems and ensure that tax calculations comply with the new requirements.
Implications for Employers and Businesses
The revised tax framework has important implications for businesses responsible for deducting and remitting PAYE on behalf of their employees.
Employers need to review employee records, verify relevant income and relief information, and ensure that payroll calculations reflect the new tax rules. Failure to apply the provisions correctly could result in under-deductions, excessive deductions or other compliance issues.
For employees, the actual effect on take-home pay will depend on their annual chargeable income, eligible reliefs and applicable deductions.
Analysis: A Shift Towards Progressive Taxation
The reforms represent a shift towards a tax structure intended to provide greater relief to lower-income earners while requiring higher-income individuals to contribute more.
If implemented effectively, the changes could improve disposable income for eligible workers and make the personal income tax system more responsive to differences in earning capacity. However, the actual benefits will depend on correct implementation, taxpayer awareness and effective compliance by employers.
It is also important to distinguish between being exempt from personal income tax and benefiting from a reduced tax liability. A worker may experience lower PAYE deductions without being completely exempt from tax.
Conclusion
Nigeria’s revised personal income tax regime introduces significant changes to how employment income is taxed, with a zero per cent rate on the first ₦800,000 of annual chargeable income and higher marginal rates for higher-income earners.
While the reforms are expected to provide relief to eligible workers, the specific claim that 1.7 million workers will benefit should be verified against the original report before publication. Taxpayers and employers should familiarise themselves with the applicable provisions to ensure accurate deductions and compliance.
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