Nigeria Tax Act 2025 vs the Old Regime: Who Pays More?

A direct comparison of the new and old Nigerian PAYE regimes, with worked examples showing who gains and who loses.

· NairaTax Tax Advisory Team · 7 min read

For most low- and middle-income earners and small companies, the new regime is better. The Nigeria Tax Act 2025 gives you a ₦800,000 0% PAYE band and hands small companies (turnover ≤ ₦50m) 0% company income tax, cutting real bills. Only the highest earners pay slightly more, at a 25% top rate.

Key takeaways

The tax authority, the Nigeria Revenue Service (NRS, formerly FIRS), now administers the reformed rules. The fastest way to see whether you personally are better or worse off is the old-vs-new comparison calculator.

How we keep this accurate: figures below match NairaTax's calculators, which implement the Nigeria Tax Act 2025.

The headline differences at a glance

The reform did not just tweak numbers — it reshaped the structure of Nigerian tax. The table below sets the most important old-versus-new changes side by side.

Feature Old regime Nigeria Tax Act 2025
PAYE 0% floor Small tax-free allowance only First ₦800,000 taxable income at 0%
Top PAYE rate 24% 25% (on income above ₦50m)
Number of PAYE bands Seven Six, cleaner structure
Small-company CIT Taxed (small-company reliefs) 0% CIT if turnover ≤ ₦50m and assets ≤ ₦250m
Education levy Tertiary Education Tax (TET) 4% Development Levy replaces TET
CGT tax-free threshold Effectively none for most gains Gains up to ₦150 million exempt
VAT 7.5% 7.5% (retained, unchanged)

The single biggest structural shift is the ₦800,000 0% band. Under the old regime, almost every kobo of taxable income was taxed once basic allowances were used up. Now a meaningful slice of income is protected before any rate applies, which is why lower and middle earners feel the reform most.

To model your own before-and-after position, use the comparison calculator — it is the one page that keeps both the old and new computations side by side.

Winners: low and middle earners, and SMEs

Salary earners on modest incomes

The clearest winners are ordinary workers. Two features do the heavy lifting: the ₦800,000 0% band and generous reliefs (pension, rent relief, NHF, NHIS) that come off gross pay before the bands even apply.

Worked example — ₦150,000/month. After the default 8% pension relief and the tax-free band, an employee earning ₦150,000/month pays only ₦10,700 in monthly PAYE, keeping ₦127,300 as net pay. That is an effective tax rate of just 7.1% — a level that leaves most take-home pay untouched.

The floor sits even lower for minimum-wage workers. An employee earning only the national minimum wage of ₦70,000/month pays ₦0 PAYE — fully exempt.

Rent relief sweetens the deal further. It equals the lower of 20% of your annual rent or ₦500,000. A worker on ₦400,000/month who pays ₦1,200,000 annual rent claims ₦240,000 of relief, trimming monthly PAYE from ₦48,740 to about ₦45,140 — roughly ₦3,600/month saved. Check your own number with the PAYE calculator.

Small and medium enterprises

The second group of clear winners is small business. A small company — annual turnover ≤ ₦50 million and fixed assets ≤ ₦250 million, excluding professional-services firms — now pays 0% company income tax and is exempt from the Development Levy.

Under the old regime, small companies still faced compliance and tax exposure that ate into thin margins. Zero CIT means a genuinely profitable small business can reinvest its earnings rather than remit them. If you run a limited company, confirm your status with the CIT calculator.

Mixed and losers: very high earners and large companies

Not everyone gains equally, and a few pay more.

Very high earners

The top PAYE rate rose from 24% to 25%, biting on taxable income above ₦50,000,000 a year. For a senior executive or high earner, the extra percentage point on the top slice is real money — although it applies only to income in that highest band, not to your whole salary.

Even so, the picture is mixed rather than purely negative. High earners still benefit from the ₦800,000 0% band and the same reliefs as everyone else on the lower slices of their income. The net effect depends on the exact salary; the PAYE calculator shows where the crossover lands for your figure.

Large companies

Large companies carry the heaviest load under the new structure. They pay 30% CIT (reducible to 25% by executive order), plus a 4% Development Levy, plus a minimum tax of 0.5% of turnover where that exceeds computed CIT.

The 4% Development Levy replaces the old Tertiary Education Tax (TET). For large firms this consolidates several older levies into one line, but at a headline 4% it is higher than the TET rate it replaces, so big companies should not assume the reform is a tax cut for them.

Investors: the ₦150m CGT exemption

Investors are among the quieter winners. Under the Nigeria Tax Act 2025, chargeable gains up to ₦150 million are exempt from Capital Gains Tax. Only gains above that threshold are taxed — individuals at the progressive PIT rates (0%–25%) and companies at 30%.

For most Nigerian investors disposing of property, shares or other assets, a ₦150m tax-free ceiling means many ordinary disposals fall entirely outside CGT. That is a marked improvement on the old regime, where gains were exposed with little breathing room.

One context point on income from investments: withholding tax (WHT) on dividends, interest and rent remains 10%. WHT is a separate charge from CGT — it applies to the income an asset produces, not the gain when you sell it — so factor both in when you plan. Estimate a disposal with the Capital Gains Tax calculator.

How to check YOUR own position

General rules only take you so far — your outcome depends on your salary, reliefs, company turnover and gains. Here is the practical way to settle it.

  1. Run the comparison. Open the old-vs-new comparison calculator and enter your income. It shows both computations together so you can read the difference in one glance.
  2. Confirm your PAYE. Enter your monthly gross, pension and rent into the PAYE calculator to see your exact deduction and effective rate.
  3. Test your company. If you own a business, use the CIT calculator to check whether you qualify for the 0% small-company rate.
  4. Model a disposal. Selling an asset? The Capital Gains Tax calculator tells you whether the ₦150m exemption clears your gain.
  5. Explore the rest. Browse every tool on the calculators page for VAT, WHT and gross-to-net checks.

For the underlying law and official guidance, see the Nigeria Revenue Service (NRS) at firs.gov.ng and the reform portal at fiscalreforms.ng.

Frequently Asked Questions

Is the Nigeria Tax Act 2025 better for low earners?

Yes. Low earners are the clearest winners. The first ₦800,000 of annual taxable income is taxed at 0%, and minimum-wage workers on ₦70,000/month are fully exempt. A worker on ₦150,000/month pays just ₦10,700 PAYE, an effective rate of 7.1%.

Do high earners pay more under the new tax law?

Somewhat. The top PAYE rate rose from 24% to 25%, and it applies to taxable income above ₦50,000,000 a year. Only the slice of income in that top band is affected, not your whole salary, but the highest earners do pay slightly more overall.

How can I compare my tax under the old and new regime?

Use the old-vs-new comparison calculator. It is the one NairaTax tool that keeps both computations side by side, so you enter your income once and immediately see whether you are better or worse off under the Nigeria Tax Act 2025.

Are small businesses better off under the Nigeria Tax Act 2025?

Yes, substantially. A small company with turnover ≤ ₦50 million and fixed assets ≤ ₦250 million (excluding professional-services firms) now pays 0% company income tax and is exempt from the Development Levy. That frees profit for reinvestment. Check your status with the CIT calculator.

What replaced the Tertiary Education Tax?

The 4% Development Levy replaced the old Tertiary Education Tax (TET). Large companies now pay this single levy on top of 30% CIT (reducible to 25% by executive order) and a minimum tax of 0.5% of turnover where that exceeds computed CIT.

Did VAT change under the new regime?

No. VAT stayed at 7.5% under the Nigeria Tax Act 2025. The reform reshaped income tax, company tax and levies, but the headline VAT rate was retained unchanged.

This article is general information, not tax advice. Confirm figures with the Nigeria Revenue Service (NRS) or a licensed tax adviser.