Nigeria's New Tax Laws Explained: What Changed for Workers and Small Businesses

Nigeria's tax rules changed on 1 January 2026, and for most workers and small businesses the change is good news. If you earn ₦800,000 a year or less, you now pay no income tax at all.

Small companies with turnover of ₦50 million or less pay no company income tax, and VAT stays at 7.5%. FIRS is now called the Nigeria Revenue Service (NRS). Here's what changed and what it means for you.

What changed under Nigeria's 2026 tax reform

President Bola Tinubu signed the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service (Establishment) Act and the Joint Revenue Board (Establishment) Act into law on 26 June 2025. The presidency confirmed that the two acts that change everyday tax bills, the NTA and the Tax Administration Act, started on 1 January 2026 as planned, after a brief scare in late 2025 that they'd be delayed.

Each change has its own detailed guide, and this page points you to them. For how much tax you'll pay on a salary, see our full PAYE Nigeria breakdown with worked examples or use the Nigeria PAYE calculator. The rest of this guide covers what changed for small businesses, freelancers and everyday payments.

Do small businesses pay tax now? The 0% company tax explained

Yes, if you qualify as a "small company". Section 56 of the Nigeria Tax Act defines a small company as one with gross turnover of ₦50,000,000 or less a year, and total fixed assets of no more than ₦250,000,000. That company pays 0% company income tax. Every other company pays 30%.

Say you run a phone accessories shop in Lagos with yearly turnover of ₦42 million and fixed assets (fittings, stock, a delivery bike) worth ₦6 million. You qualify as a small company: no company income tax, and no 4% Development Levy either (more on that below). You still register with the NRS, keep proper records and file a yearly return. The exemption isn't automatic just because you're small, though the return can include a simpler statement of accounts instead of full audited accounts. That's on top of registering the business with CAC in the first place: see what CAC registration costs in 2026 if you haven't done that yet.

One exclusion catches people out: professional services firms don't qualify as small companies regardless of turnover. If you run a law firm, an accounting practice, a medical clinic or a similar consultancy, the 0% rate doesn't apply to you even if you earn ₦10 million a year.

Nigeria's biggest companies got a separate rule. The Act sets a 15% minimum effective tax rate for any company that's part of a multinational group, or any single company with turnover of ₦20 billion or more a year, so this doesn't touch small or medium businesses.

Two different thresholds: ₦50 million and ₦100 million

This is where most small business tax exemption guides in Nigeria get muddled, because the reform created two separate thresholds for two separate things:

The Nigeria Tax Administration Act separately defines a "small business" as one earning gross turnover of ₦100,000,000 or less with fixed assets under ₦250,000,000, again excluding professional services. So a business turning over ₦70 million a year pays company income tax at 30% (it's above the ₦50 million small-company cut-off) but still doesn't have to charge VAT or file VAT returns (it's below the ₦100 million small-business cut-off). Both rules exclude professional service providers no matter their size.

Do small businesses have to charge VAT?

No, not if you're under the ₦100 million turnover and ₦250 million fixed-assets thresholds above. The Nigeria Tax Administration Act exempts small businesses from registering for VAT, charging VAT on their sales and filing monthly VAT returns. It's automatic, so you don't need to apply.

A few practical points if this is you:

1. You can choose to register anyway. A small business can write to the NRS to register, charge VAT and file returns voluntarily. That's worth doing if most of your customers are VAT-registered businesses that would rather claim back the VAT you charge them.
2. Crossing the threshold is permanent for the year. Once your turnover takes you past ₦100 million, you must start filing monthly VAT returns going forward.
3. This exemption doesn't affect your company income tax. VAT and company income tax are worked out separately, so check the ₦50 million company income tax threshold above on its own.

What's zero-rated and VAT-exempt now

The standard VAT rate is still 7.5%, but the new law lengthened both the list of things sold at 0% VAT and the separate list of things completely exempt from VAT. That's useful to know if you sell any of these.

Charged VAT at 0% (the seller can still reclaim input VAT): basic food items, medicines and pharmaceutical products, educational books and materials, school and university tuition, medical services and medical equipment, and exported goods and services.

Exempt from VAT entirely: land and buildings, money and securities, baby products, locally made sanitary pads and tampons, shared passenger road transport, and government licences.

If you sell food, run a school, clinic or pharmacy, or export goods and services, read this carefully rather than taking a competitor's word for it. Whether your sales are "zero-rated" or "exempt" decides whether you can claim back the VAT you paid on your own supplies.

The 4% Development Levy: is it a new charge on your business?

Only if you're not a small company. A development levy of 4% is charged on the assessable profits of every company except small companies and non-resident companies. It replaces the old separate charges for tertiary education tax, the NITDA levy, the NASENI levy and the Police Trust Fund levy, combined into one. It's a charge on company profits, not something taken from employees' salaries. Our PAYE guide explains the confusion if you've heard it called a new payroll deduction.

What this means for freelancers and side-hustlers

If you're paid a monthly salary, your employer deducts PAYE using the new bands automatically. If you invoice clients, sell online or get paid in dollars from abroad, no one deducts it for you. You're taxed as self-employed through self-assessment, using the same personal income tax bands (0% on the first ₦800,000, rising to 25% above ₦50 million a year). See our full breakdown of what freelancers and remote workers owe on dollar income, and who to file with.

That also means the small-company and small-business turnover thresholds above are what decide whether you owe company tax or have to charge VAT once you register a company for your freelance or e-commerce work, rather than PAYE rules. If you're getting paid from abroad through PayPal, Payoneer or similar, see our guide on receiving PayPal payments in Nigeria for how that income lands before tax even comes into it, our roundup of digital skills in demand across Africa if you're deciding what kind of freelance work to build toward, and our comparison of which freelance platforms pay reliably once you have.

Mistakes to avoid under the new rules

• Mixing up the ₦50 million and ₦100 million figures. One decides your company income tax and the other decides VAT registration. A business can be "too big" for one and still qualify for the other.

• Professional services firms assuming they're exempt because they're small. Both thresholds specifically exclude professional services, whatever your turnover.

• Treating 0% company tax as "no filing required." Small companies still need a Tax Identification Number, proper accounting records and an annual return, even with nothing to pay. For individuals, that Tax ID is just your NIN, so make sure every signatory on the account is registered with NIMC before you try to open it.

• Forgetting your BVN when you open the business account. Every signatory on a Nigerian business account needs a valid BVN, not just the company's Tax ID.

• Payroll or invoicing software still using 2025 figures. Some smaller employers and accounting packages hadn't updated their PAYE bands or VAT settings months into 2026. Check your payslip or invoices against the figures in this guide rather than assuming your software is up to date.

• Confusing the Development Levy with a personal tax. It's charged on company profits, never deducted from an employee's paycheck.

• Selling land or property. The old Capital Gains Tax Act is now part of the same system, but a sale still isn't legal without a genuine title with Governor's Consent. Verify the land documents before you think about the tax.

• Not reading the small print on your bank or fintech app. The same 2025 tax reform is why ₦50 stamp duty and 7.5% VAT now appear on ordinary bank transfers. See how that works on an account like Moniepoint.

For more on managing money and running a business in Nigeria, see our Nigeria guides hub.

Frequently asked questions

What is Nigeria's new tax law called and when did it take effect?

It's the Nigeria Tax Act (NTA) 2025, alongside the Nigeria Tax Administration Act, the Nigeria Revenue Service (Establishment) Act and the Joint Revenue Board (Establishment) Act. All four were signed on 26 June 2025, and the two that affect day-to-day tax bills, the NTA and the Tax Administration Act, took effect on 1 January 2026.

What turnover qualifies a business as a "small company" for 0% tax in Nigeria?

A turnover of ₦50 million or less a year with fixed assets not exceeding ₦250 million, under Section 56 of the Nigeria Tax Act. This is different from the ₦100 million turnover threshold that decides whether a business must charge VAT, which sits in the Nigeria Tax Administration Act instead.

Did VAT increase to 10% or 15% in Nigeria?

No. VAT stayed at 7.5%. An early proposal floated raising it in stages to 15% by 2030, but that was dropped after pushback from state governors and business groups, and the final Act kept the existing 7.5% rate while widening the list of goods and services taxed at 0% or exempt.

Is the Federal Inland Revenue Service (FIRS) still in charge of taxes in Nigeria?

Not by that name. FIRS was renamed the Nigeria Revenue Service (NRS) in the same reform, and it now handles both personal and company taxes at federal level, alongside the state tax offices. NRS also runs a new filing platform, Rev360, which is replacing TaxPro Max in stages. See our guide to registering and logging in on the Rev360 portal if you haven't moved over yet.

Do small businesses in Nigeria still need to register for tax even if they pay 0%?

Yes. A small company still needs a Tax Identification Number, must keep financial records and has to file an annual return, even when its company income tax liability works out to zero. The exemption removes the tax bill, not the paperwork.

Do freelancers and online workers pay tax under the new law?

Yes, but not through PAYE. Freelancers and business owners are taxed as self-employed through self-assessment, using the same personal income tax bands as salaried workers: 0% on the first ₦800,000 a year, then rising in steps to 25% above ₦50 million.