Nigeria’s new tax reform regime, which takes effect on January 1, 2026, introduces 50 major tax exemptions and reliefs designed to ease the financial burden on low-income earners, salary workers, SMEs, startups, and vulnerable households.
The reforms are part of the government’s broader strategy to stimulate economic growth by reducing tax pressure, encouraging investment, and supporting job creation.
Below is a breakdown of the key exemptions and reliefs across major tax categories:
PERSONAL INCOME TAX (PAYE)
Who benefits: Workers, low-income households, young employees, and middle-income earners.
– Individuals earning the national minimum wage or less will pay zero tax.
– Workers with annual gross income up to N1.2 million (or about N800,000 taxable income) are fully exempt.
– Reduced PAYE rates for workers earning up to N20 million annually.
– Gifts received are also exempt from tax.
ALLOWABLE RELIEFS AND DEDUCTIONS FOR INDIVIDUALS
These are expenses that reduce taxable income:
– Pension contributions
– National Health Insurance Scheme (NHIS) contributions
– National Housing Fund (NHF) contributions
– Interest on loans for an owner-occupied home
– Life insurance premiums or annuity payments
– Rent relief: 20% of annual rent (up to N500,000)
PENSIONS AND GRATUITIES – EXEMPT
– Pension assets under the Pension Reform Act remain tax-free.
– Pension, gratuity, or retirement benefits under the PRA are exempt.
– Up to N50 million in compensation for job loss is exempt.
CAPITAL GAINS TAX (CGT) EXEMPTIONS
Who benefits: Property owners, everyday Nigerians, investors, and retirees.
– Sale of an owner-occupied home
– Personal items (chattels) valued up to N5 million
– Sale of up to two private vehicles per year
– Gains on shares below N150 million per year or gains up to N10 million
– Exemption applies if larger gains are reinvested
– Pension funds, charities, and religious institutions (non-commercial)
COMPANIES INCOME TAX (CIT) RELIEFS
Who benefits: Small businesses, startups, agric firms, and employers.
– Small companies with turnover of N100 million or less and fixed assets not more than N250 million pay 0% CIT.
– Certified or labelled startups qualify for full exemption.
– Compensation relief: 50% deduction for companies that increased wages or provided transport subsidies for low-income staff.
– Employment relief: 50% deduction on salaries of new employees retained for at least three years.
– A five-year tax holiday for agricultural ventures including crop farming, livestock, and dairy.
– Tax exemption on gains earned by venture capitalists, accelerators, incubators, and private equity funds investing in certified startups.
DEVELOPMENT LEVY
– Small companies are exempt from the 4% development levy.
WITHHOLDING TAX EXEMPTIONS
– Small companies, manufacturers, and agricultural businesses are exempt from withholding tax on their income.
– Small companies are also exempt from withholding tax deductions on payments made to suppliers.
VALUE ADDED TAX (VAT) – EXEMPT OR ZERO PERCENT
Who benefits: Households, students, farmers, health workers, transport users, and SMEs.
Essential goods and services
– Basic food items
– Rent
– Education services and learning materials
– Health and medical services
– Pharmaceuticals
Energy and mobility
– Diesel, petrol, solar panels, and accessories
– Electric vehicles and EV parts
– Shared road transport (non-charter)
Agriculture
– Fertilizers, seeds, seedlings, feeds, live animals
– Purchase or lease of agricultural equipment
Technology and social services
– Disability aids including hearing aids, wheelchairs, and braille materials
– Baby products
– Sanitary pads, towels, and tampons
Businesses
– Small companies with turnover of N100 million or less do not charge VAT.
– Refunds of VAT on assets and overheads used to produce VATable or zero-rated goods and services.
Land and property
– Land and buildings are exempt from VAT.
STAMP DUTY EXEMPTIONS
– Electronic transfers below N10,000
– Salary transfers
– Intra-bank transfers
– Transfers involving government securities or shares
– All documents related to transfer of stocks and shares
THE BOTTOM LINE
These 50 tax reforms are designed to:
– Reduce the tax burden on ordinary Nigerians
– Support small businesses and startups
– Encourage job creation and employee welfare
– Expand access to essential goods and services
– Stimulate economic growth while protecting vulnerable groups
Share this with anyone who needs to understand how the new tax system can benefit them.
