The Nigeria Tax Act 2025 Is Now in Force
The Nigeria Tax Act 2025 has been law since 1 January 2026. Here is what changed for PAYE, CIT, CGT and VAT — and what you need to do now.
· NairaTax Tax Advisory Team · 7 min read
Yes — the Nigeria Tax Act 2025 is in effect now. It has been in force since 1 January 2026. The biggest changes: PAYE now runs on 0%–25% bands with the first ₦800,000 of taxable income tax-free, small companies (turnover ≤ ₦50m) pay 0% company income tax, capital gains up to ₦150m are exempt, and FIRS is now the Nigeria Revenue Service (NRS).
Key takeaways
- The Nigeria Tax Act 2025 (NTA 2025) took effect on 1 January 2026 and is the current, live law governing PAYE, CIT, VAT, CGT and withholding tax.
- PAYE now uses six bands from 0% to 25%, with the first ₦800,000 of annual taxable income taxed at 0%; minimum-wage earners (₦70,000/month) pay ₦0.
- Small companies — turnover ≤ ₦50 million and fixed assets ≤ ₦250 million — pay 0% CIT and are exempt from the new levy; other firms pay a 4% Development Levy that replaces the old Tertiary Education Tax.
- Capital gains up to ₦150 million are now exempt; only gains above that are taxed.
- VAT stays at 7.5%, and the tax authority is now the Nigeria Revenue Service (NRS), formerly the Federal Inland Revenue Service (FIRS).
The Nigeria Tax Act 2025 is no longer a proposal or a countdown — it is the law you are taxed under today. It consolidates decades of scattered tax legislation into one act, resets the rates for individuals and companies, and renames the federal tax authority. Below is what actually changed on 1 January 2026 and what each group needs to do now.
How we keep this accurate: figures below match NairaTax's calculators, which implement the Nigeria Tax Act 2025.
What took effect on 1 January 2026
From 1 January 2026, the Nigeria Tax Act 2025 replaced the previous patchwork of tax laws. In practical terms, four things changed at once:
- A new PAYE rate table (0%–25%) with a large tax-free floor.
- A 0% company income tax rate for genuinely small companies.
- A single 4% Development Levy in place of the Tertiary Education Tax and several older levies.
- A ₦150 million exemption on capital gains.
The federal tax authority you knew as FIRS is now the Nigeria Revenue Service (NRS). VAT is unchanged at 7.5%. You can see the reform details on the Nigeria Revenue Service site and the government's fiscal reforms portal.
If you want to see your own numbers under the new law, the NairaTax calculators are already updated to the NTA 2025 rules.
PAYE: the new 0%-to-25% bands and the ₦800,000 tax-free floor
PAYE (Pay-As-You-Earn) is the tax deducted from salaries. Under the NTA 2025, it is charged on annual taxable income — that is, your gross pay minus reliefs — using these bands:
| Annual taxable income | Rate |
|---|---|
| ₦0 – ₦800,000 | 0% |
| ₦800,001 – ₦3,000,000 | 15% |
| ₦3,000,001 – ₦12,000,000 | 18% |
| ₦12,000,001 – ₦25,000,000 | 21% |
| ₦25,000,001 – ₦50,000,000 | 23% |
| Above ₦50,000,000 | 25% |
The headline change is the ₦800,000 tax-free floor: the first ₦800,000 of taxable income is taxed at 0%. Crucially, this applies after reliefs, so the amount of gross salary you can earn before paying any tax is higher still.
Reliefs come off before the bands
Your taxable income is gross pay minus total reliefs. The main reliefs are:
- Pension — default 8% of gross.
- Rent relief — the lower of 20% of your annual rent or ₦500,000.
- NHF, NHIS, life-assurance premiums, and owner-occupier house-loan interest.
An employee on the national minimum wage of ₦70,000/month is fully exempt and pays ₦0 PAYE.
Worked salary examples
Using an 8% pension deduction and no rent relief unless noted:
| Monthly gross | Monthly PAYE | Monthly net | Effective rate |
|---|---|---|---|
| ₦70,000 (min wage) | ₦0 | ₦70,000 | 0% (exempt) |
| ₦150,000 | ₦10,700 | ₦127,300 | 7.1% |
| ₦400,000 | ₦48,740 | ₦319,260 | 12.2% |
| ₦1,000,000 | ₦148,100 | ₦771,900 | 14.8% |
Rent relief makes a real difference. Take the ₦400,000/month earner: with an annual rent of ₦1,200,000, rent relief is ₦240,000 (20% of ₦1.2m), and monthly PAYE drops from ₦48,740 to ₦45,140 — about ₦3,600/month less.
Run your own salary through the PAYE calculator, or line up two offers side by side with the compare tool.
Companies: ₦50m small-company 0% CIT and the 4% Development Levy
The company income tax (CIT) rules changed sharply on 1 January 2026, and the change is generous to small businesses.
Small companies pay 0%
A small company — one with annual turnover of ₦50 million or less AND fixed assets of ₦250 million or less, excluding professional-services firms — pays 0% CIT and is exempt from the Development Levy. For a large share of Nigerian SMEs, that means no federal profits tax at all.
Everyone else: 30% CIT plus a 4% levy
Companies that are not "small" pay 30% CIT (reducible to 25% by executive order). On top of that, they pay a 4% Development Levy — this single levy replaces the old Tertiary Education Tax and consolidates several earlier education and technology levies. A minimum tax of 0.5% of turnover applies where it exceeds the computed CIT.
| Company type | CIT rate | Development Levy |
|---|---|---|
| Small company (≤ ₦50m turnover, ≤ ₦250m assets) | 0% | Exempt |
| Other companies | 30% (down to 25% by order) | 4% |
Check where your business lands with the CIT calculator.
Capital gains: the ₦150m exemption
Capital gains tax (CGT) also got a much larger buffer. Under the NTA 2025, chargeable gains up to ₦150 million are exempt. Only gains above ₦150 million are taxed — individuals at the progressive personal income tax rates (0%–25%), and companies at 30%.
This mostly removes small and mid-sized asset disposals from the CGT net. For exact figures on a specific gain, use the capital gains calculator.
The FIRS-to-NRS rename
The Federal Inland Revenue Service (FIRS) is now the Nigeria Revenue Service (NRS). This is more than a name change — it reflects the consolidation of federal tax administration under the reform. In practice:
- Notices, portals and correspondence now carry the NRS name.
- Your Taxpayer Identification Number (TIN) and obligations carry over.
- The same body administers PAYE remittances, CIT, VAT and withholding tax.
When you read older guides referring to "FIRS", read it as the NRS (formerly FIRS).
VAT stays at 7.5%
Despite the scale of the reform, Value Added Tax remains at 7.5%. There is no VAT rate increase under the Nigeria Tax Act 2025. Businesses that charge and remit VAT continue at the same rate, on the same broad basis, as before. If you need to add or strip VAT on an invoice, the VAT rules are unchanged — plan your pricing accordingly.
What to do now: deadlines and next steps
The law is live, so the actions below matter this year, not "someday".
If you are an employee:
- Confirm your January 2026 payslip reflects the new 0%–25% bands — your PAYE should generally be lower or unchanged, not higher.
- Make sure your employer is applying rent relief if you qualify; it can save thousands of naira a month.
- Recheck your take-home with the PAYE calculator.
If you run a business:
- Test whether you qualify as a small company (≤ ₦50m turnover, ≤ ₦250m assets). If you do, your CIT is 0%.
- If you are a larger company, budget for the 4% Development Levy in place of the old Tertiary Education Tax, and confirm your accounting reflects it. Model it in the CIT calculator.
Everyone:
- Keep track of filing dates on the tax deadlines page so PAYE remittances, CIT and VAT returns are filed on time.
- Ensure you have a valid TIN — for withholding tax, no TIN means the rate is doubled.
Frequently Asked Questions
When did the Nigeria Tax Act 2025 take effect?
The Nigeria Tax Act 2025 took effect on 1 January 2026. It was signed in 2025 and is now the current, live law governing PAYE, company income tax, VAT, capital gains tax and withholding tax across Nigeria.
How much can I now earn tax-free in Nigeria?
The first ₦800,000 of annual taxable income is taxed at 0%. Because taxable income is your gross pay minus reliefs (pension, rent relief and others), the amount of gross salary you can earn before paying any PAYE is higher still. A minimum-wage earner on ₦70,000/month pays ₦0.
Is FIRS still called FIRS?
No. The Federal Inland Revenue Service (FIRS) has been renamed the Nigeria Revenue Service (NRS). It is the same federal tax authority, now operating under the new name as part of the reform. Your TIN and obligations carry over unchanged.
Did VAT change under the Nigeria Tax Act 2025?
No. VAT remains at 7.5%. The Nigeria Tax Act 2025 did not raise the VAT rate. Businesses continue to charge and remit VAT at the same rate as before.
Do small companies still pay company income tax?
Not if they qualify as "small". A company with annual turnover of ₦50 million or less and fixed assets of ₦250 million or less (excluding professional-services firms) pays 0% CIT and is exempt from the Development Levy. Larger companies pay 30% CIT (reducible to 25%) plus a 4% Development Levy.
What happened to the Tertiary Education Tax?
The old Tertiary Education Tax has been replaced by a single 4% Development Levy on non-small companies. This consolidates several earlier education and technology levies into one charge.
Will my PAYE go up or down under the new law?
For most employees, PAYE stays the same or falls, thanks to the ₦800,000 tax-free floor and rent relief. For example, a ₦400,000/month earner pays about ₦48,740 with no rent relief, dropping to ₦45,140 with qualifying rent. Check yours with the PAYE calculator.
This article is general information, not tax advice. Confirm figures with the Nigeria Revenue Service (NRS) or a licensed tax adviser.