Photo Credit: State house/Website
Today, 1 January 2026, marks the official commencement of Nigeria’s most significant fiscal overhaul in decades. Following the signing of the Nigeria Tax Act and accompanying legislations by President Bola Tinubu in 2025, the new rules governing personal income, corporate obligations, and tax administration are now live.
While the reforms aim to streamline a historically fragmented system, they bring a mix of exemptions for low-income earners and stricter compliance measures for high-turnover businesses and wealthy individuals.
Personal Income Tax: New Thresholds and Bands
The most immediate change for Nigerian employees is the restructuring of the Personal Income Tax (PIT) system. The reform replaces the previous flat relief system with a more progressive structure.
- Exemption Limit: Individuals earning an annual gross income of ₦800,000 or less (approximately ₦66,667 monthly) are now fully exempt from personal income tax.
- Tax Bands: For those earning above the exemption limit, tax rates are applied in ascending bands, reaching a maximum of 25% for annual incomes exceeding ₦50 million.
- Relief Adjustments: The former Consolidated Relief Allowance (CRA) has been abolished. In its place, specific reliefs have been introduced, such as a Rent Relief system which allows for a deduction of 20% of annual rent paid (capped at ₦500,000).
The “Bank Narration” Clarification
Addressing widespread public concern, Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, recently clarified on Channels Television that tax authorities do not have the power to monitor or deduct funds based on bank transfer descriptions.
“The raging insinuation that bank transaction narrations could be used to impose taxes is baseless misinformation,” Oyedele stated. He emphasised that the system remains based on self-declaration, where taxpayers report their income annually rather than being subjected to automated “per-transaction” surveillance.
Business and Corporate Shifts
While Personal Income Tax changes start today, some corporate adjustments have a staggered timeline, but the following frameworks are now active for 2026 planning:
- Small Business Relief: Companies with an annual turnover of ₦100 million or less are now exempt from Companies Income Tax (CIT) and the newly introduced Development Levy.
- Development Levy: This 4% levy on assessable profits replaces multiple previous charges, including the Tertiary Education Tax and the Police Trust Fund Levy, for all companies above the small business threshold.
- Reporting Threshold: Banks are now mandated to disclose accounts to the Nigeria Revenue Service (NRS) only when they exceed a quarterly turnover of ₦25 million (for individuals) or ₦100 million (for companies).
Digital Enforcement and Penalties
The Nigeria Revenue Service (NRS), formerly the FIRS, is moving toward a digital-first enforcement model.
- Mandatory TIN: The use of a Taxpayer Identification Number (TIN) is now required for all significant financial transactions. For individuals, your NIN serves as your TIN.
- Stricter Penalties: Failure to file tax returns now carries an immediate penalty of ₦100,000 for the first month of default, followed by ₦50,000 for every subsequent month.
