Nigeria’s New Tax Law and What It Means for You

Nigeria’s new tax law is set to take effect on 1 January 2026, reshaping how individuals, freelancers, and businesses handle their finances. The government aims to expand its tax net to cover more income earners while modernising financial tracking systems. But what does this really mean for you?

What Is a Tax?

A tax is a compulsory contribution individuals and businesses make to the government based on their earnings. For instance, if you earn ₦100,000 monthly (₦1.2 million yearly), you owe a percentage of that income to the government. The more you earn, the higher your tax rate, and under the new law, this structure is being tightened.

Breakdown of Nigeria’s New Tax Law

From January 2026, anyone earning more than ₦809,000 per year will be taxed. The new structure is progressive, meaning your rate increases as your income rises.

Here’s the breakdown:

• ₦0 – ₦800,000/year: Exempted

• ₦800,000 – ₦3 million/year: 15%

• ₦3 million – ₦12 million/year: 18%

• ₦12 million – ₦25 million/year: 21%

• ₦25 million – ₦50 million/year: 23%

• ₦50 million and above/year: 25%

This applies mainly to income credited into your bank account. Funds already sitting idle in an account aren’t taxed, but interest generated on savings is.

Why the Government Is Doing This

This tax reform is rooted in the Finance Act of 2019, which amended Section 49 of the Personal Income Tax Act.

While the law is about raising revenue, it’s also about building a comprehensive financial database. Nigeria has long struggled to trace the flow of money across accounts — including unreported income and illicit funds. The government now intends to monitor transactions more closely, using tools like the Tax Identification Number (TIN) to track financial activity.

In the near future, the TIN could become more relevant than BVN or NIN for financial verification.

How the Tax Law Affects Freelancers

Freelancers, who often earn irregular incomes, are among those most impacted by the new tax law. If your total annual earnings exceed ₦800,000, you’ll be required to remit a percentage of your income as tax.

To stay compliant, it’s crucial to separate your finances. Maintain a dedicated business account for all income and a personal account for everyday expenses. This makes it easier to track what’s taxable and prevents unnecessary complications. You can also pay yourself a regular salary from your business account to manage your tax exposure more efficiently.

In addition, ensure your business is registered and tied to a valid Tax Identification Number (TIN). This helps you stay tax-compliant and protects you from potential account restrictions.

Freelancers should also be aware of the Electronic Money Transfer Levy (EMTL); while small transfers are exempt, large ones may attract a small charge.

Tip: essentials like food, healthcare, and education remain tax-free. You’re only taxed on the income you earn, not on the money already sitting in your account.

Tax and the Crypto Industry

Crypto investors aren’t left out. Starting in 2026, personal income tax of up to 25% will apply to profits made from selling cryptocurrencies, not from merely holding them.

Exchanges registered in Nigeria will be required to report user transactions or risk losing their licences. This includes reporting on:

• Trades and exchanges of virtual assets

• Transfers between wallets

• Profits made from sales

Operators that fail to comply face penalties of ₦10 million for the first month and ₦1 million for each subsequent month.

This marks a major shift since the CBN lifted its crypto transaction ban in 2023. The move signals that Nigeria now recognises blockchain as a legitimate economic contributor and aims to tap into the growing digital finance ecosystem.

Tax Implications for Startups

Startups and small businesses will also experience changes under the new tax law. Companies earning below ₦50 million annually are exempt from Company Income Tax (CIT) and enjoy simplified filing procedures, a move aimed at easing the burden on smaller enterprises.

For larger corporations, the corporate tax rate has been reduced to 25%, in addition to Value Added Tax (VAT) on qualifying expenses.

Overall, these measures are designed to support early-stage startups, promote business growth, and encourage tax compliance among more established companies.

The government’s push for tax transparency isn’t just about revenue; it’s about data, accountability, and control. By linking transactions to TINs and digital accounts, Nigeria aims to track money flows, reduce corruption, and align with global financial standards.

Still, the big question remains: Will this strengthen Nigeria’s economy or add pressure to citizens already battling inflation?

The 2026 tax law will change how Nigerians — from freelancers to founders — handle their finances. Whether you work online, trade crypto, or run a startup, understanding your tax obligations now is key to staying compliant and avoiding penalties later.