The Nigeria Tax Act 2025, which came into full force on January 1, 2026, has since introduced sweeping changes designed to modernize the system, clarify widespread confusion, and provide significant relief for low earners and specific sectors.
The law particularly draws a clear line between taxable income and simple money movement, a distinction that has long been a source of public anxiety.
Authorities have moved to dispel several common fears head-on. Crucially, the law confirms that everyday banking activities, deposits, transfers, withdrawals, and the mere holding of money in an account, are not taxable events.
Loans
Loans taken by individuals remain non-taxable, as they are not considered income, though lenders will be taxed on the interest they earn.
Students
For students without income or individuals earning the national minimum wage or less than ₦800,000 annually, there will be no personal income tax liability.
Tax Net
The new law brings the digital economy squarely into the tax net. Profits from cryptocurrencies, NFTs, and other digital assets will now be subject to tax. Furthermore, the foreign income exemption previously enjoyed by creatives like musicians, authors, and sportspeople has been removed, meaning they must pay Nigerian tax on their global earnings.
However, to encourage repatriation of funds, dividends, interest, rent, and royalties earned abroad are exempt, provided they are brought into Nigeria through approved banking channels.
Others
Significant relief measures are embedded in the legislation. A new rent relief allows individuals to claim 20% of their annual rent, up to a cap of N500,000, against their taxable income. Military salaries and disability pensions for armed forces personnel are now fully tax-exempt. Small companies with an annual turnover below N50 million will pay no company income tax, and new agricultural companies will enjoy a five-year tax holiday. All government bonds also retain their tax-free status.
For the average employee, the shift to a simpler, progressive tax band system could mean more take-home pay. For instance, an individual earning N6 million annually could see their tax bill reduce by approximately N116,000, assuming they claim the new rent relief. The tax bands start at 0% for the first N800,000 and rise progressively to 25% for income above N50 million. Large severance packages below N50 million remain untaxed, while capital gains on shares are only taxed if the transaction value exceeds N150 million or the gain is above N10 million.
Before you go!
While the law facilitates closer monitoring of business accounts for compliance, its main message is one of targeted taxation on actual income and profits.
