Nigeria’s new tax reform law has been officially signed and will take effect from the 2026 fiscal year. The new law introduces several changes aimed at improving compliance, easing the tax burden on low-income earners, and modernising the country’s tax administration.
According to the details released by the Federal Inland Revenue Service (FIRS), the reform sets a new income threshold of N800,000 per year, below which individuals will not pay personal income tax. For companies, the law specifies that only those with an annual turnover of N100 million or more will be required to pay Company Income Tax.
The tax law also provides new deductions for individuals. For instance, taxpayers can now claim 20 percent of their rent payment as a deductible expense, capped at N500,000 per year. These measures are designed to ease the financial pressure on workers while ensuring that the tax system remains fair and transparent.
However, many Nigerians have started asking questions about how the new tax structure will affect them when it takes effect in January 2026. Some wonder if their salaries or bank accounts will be taxed directly, while others are unsure whether employers will handle their tax filing or if they must do it themselves.
Speaking on the new rules, a senior tax officer at the FIRS, Mrs. Aisha Yusuf, explained that “every taxpayer, whether earning above or below the N800,000 threshold, is still required to file an annual tax return.” She referred to Section 29 of the new Act, which states that if an individual fails to keep proper income records, the tax authorities can assess and charge tax using what is known as a presumptive tax regime.
In simpler terms, even if you earn below the tax threshold, you must still file your tax return and keep financial records. Failure to do so may lead to the FIRS estimating your income and imposing a presumptive tax.
One major change in the new law is the responsibility for claiming deductions. In the current system, many employees automatically enjoy tax deductions through payroll systems handled by their employers. However, from 2026, the burden of claiming deductions will shift to individual taxpayers.
Tax consultant and chartered accountant Mr. Tunde Adesina told journalists that “the automatic 20 percent payroll deduction will be replaced with deductions based on actual contributions made to pension, life insurance, National Housing Fund, and the National Health Insurance Scheme.” He added that employees will need to file their own tax returns to claim these deductions, even if their employers submit returns on their behalf.
Another question that has drawn public curiosity is whether income from immoral or illegal sources will be taxed. In response, a Lagos-based tax lawyer, Barrister Chidi Nwosu, clarified that “tax laws focus on income generation, not morality. If someone earns income from any source, legal or not, the law expects that income to be declared and taxed.”
He cited a famous example from history — Al Capone, the notorious American gangster who was jailed in 1931 not for his crimes, but for tax evasion. The case established a global precedent that all income, regardless of its source, is taxable.
Many Nigerians have also asked if their bank accounts or transfers will be directly taxed under the new system. According to the FIRS, the answer is no. Bank balances or transfers alone will not attract taxes. Only income, profits, or interest earned on deposits will be taxable. The government clarified that taxes apply on net profits and income, not just on money movements or total assets.
Financial analyst Mrs. Kemi Ojo advised Nigerians to start preparing early for the changes. “The best approach is to maintain proper records of your income and expenses, keep evidence of rent payments, and ensure your pension and insurance contributions are documented,” she said. “This will make tax filing in 2026 easier and prevent unnecessary penalties.”
With the introduction of this reform, the federal government aims to improve voluntary compliance, reduce evasion, and ensure that those who earn more pay their fair share. However, experts believe that effective public education and digital filing systems will be key to the reform’s success.
As the 2026 fiscal year approaches, Nigerians are encouraged to familiarise themselves with the new provisions and seek guidance from certified tax professionals. The new tax era promises to reshape how individuals and businesses handle their finances, promoting greater accountability and transparency in the nation’s tax system.
