As we enter the first month of 2026, the talk of the town in Lagos isn’t just the harmattan chill—it’s the Nigeria Tax Act 2025.
The new laws, which officially took effect on January 1st, 2026, represent the most significant overhaul of our fiscal system in decades. For the average Nigerian employee and business owner, the biggest question is simple: “How much of my money do I actually get to keep?”
At Penlit and Greyson, we believe that legal clarity is the first step toward financial security. Here is what you need to know about the “2026 Tax Revolution” and your take-home pay.
1. The ₦800,000 Threshold: A Win for Low Earners
The most impactful change for the Nigerian workforce is the new exemption limit. Under the old system, the tax-free threshold was quite low, often pulling minimum wage earners into the tax net.
The New Rule: If your annual income is ₦800,000 or less (roughly ₦66,667 per month), you are now entirely exempt from Personal Income Tax.
This is designed to provide immediate relief to low-income earners, ensuring that those at the base of the economic pyramid keep 100% of their earnings to combat the rising cost of living. Even if you earn slightly above this, the first ₦800,000 of your income remains taxed at 0%.
2. New Progressive Tax Brackets: A Layered Approach
For those earning above the threshold, the tax system has moved to a more “progressive” model. This means you aren’t taxed a flat rate on your entire salary; instead, your income is taxed in “layers” or bands.
| Annual Income Band (₦) | Tax Rate |
| First ₦800,000 | 0% (Tax-Free) |
| Next ₦2,200,000 | 15% |
| Next ₦9,000,000 | 18% |
| Next ₦13,000,000 | 21% |
| Next ₦25,000,000 | 23% |
| Above ₦50,000,000 | 25% |
What this means for you: If you earn ₦3,000,000 a year, you don’t pay 15% on the whole ₦3M. You pay 0% on the first ₦800k, and 15% only on the remaining ₦2.2M. This structure ensures that as you earn more, you contribute fairly, but your “base” remains protected.
3. The End of CRA and the Rise of Rent Relief
One major change for 2026 is the abolition of the Consolidated Relief Allowance (CRA). In its place, the government has introduced more targeted reliefs to help with real-world expenses.
- New Rent Relief: You can now claim a deduction of 20% of your annual rent, capped at ₦500,000. To benefit from this, ensure you have valid rent receipts and a formal lease agreement.
- Existing Deductions: Contributions to Pension, the National Housing Fund (NHF), and National Health Insurance (NHIS) remain fully tax-deductible.
4. Why Your “Take-Home” Might Actually Increase
While “new taxes” usually sound like bad news, many middle-income earners in Lagos will actually see a slight increase in their net pay this month. By combining the ₦800,000 tax-free band with the new Rent Relief and traditional pension deductions, your “Chargeable Income” (the portion the government actually taxes) may be significantly lower than it was in 2025.
How Penlit and Greyson Can Help
The Nigeria Tax Administration Act 2025 has also introduced stricter penalties for non-compliance and new digital filing requirements through the Nigeria Revenue Service (NRS).
Whether you are an HR manager needing to update your company’s payroll software or an individual looking to optimize your tax position, our team is here to help. We provide:
- Payroll Compliance Audits to ensure your 2026 deductions are accurate.
- Tax Planning for High-Net-Worth Individuals to leverage the new 25% cap.
- Advisory on Rent Relief and other statutory documentation.
Would you like us to run a “Tax Impact Simulation” for your business or personal income to see exactly how your 2026 take-home pay has changed?
