2026 Nigerian Tax Laws: A Recap

The 2026 Nigerian tax laws are in full swing, and as expected, they bring changes that could impact how you earn, spend, and manage your finances. To help navigate these updates, Raenest hosted a live webinar on Saturday, 27th December, at 5:00 PM (WAT) via our X space (@RaenestApp). Our CFO, Festus Audu, joined Emeka Chime, Associate Director, Tax at PwC, to break down the essentials of the new tax laws and what they mean for individuals and businesses alike.

During the session, attendees gained a clear understanding of how the 2026 tax changes impact freelancers, creators, and anyone earning in USD, GBP, or EUR. The webinar also explored business implications, offered practical compliance tips, and provided guidance on planning to minimise surprises in the coming year.

Whether you missed the live session or want a refresher, this recap highlights the key takeaways and answers some frequently asked questions from the webinar.

Why were these Tax Reforms introduced?

The first thing you need to understand is why these reforms were introduced. The short answer: Nigeria’s tax system needed an update. But the reasons go deeper:

• Modernising old rules: For many Nigerians, tax has been something in the background, more or less a box you ticked without much thought. The old laws were outdated, scattered, and sometimes written in language only a lawyer could decipher. The reforms bring clarity, making tax a topic anyone can understand.
  
  
• Consolidating laws: Before, if you wanted to figure out how to pay one type of tax, you had to dig through one law; another tax, another law. Now, the rules are gathered in one place, simplifying compliance for individuals and businesses alike.
  
  
• Incorporating technology: The reforms recognise that technology is an integral part of everyday life. This opens up smoother ways to track, file, and pay taxes.
  
  
• Simplifying language: The new laws are written in plain English, with plans for translations into local languages, so they are truly accessible.
  
  
• Encouraging growth responsibly: Some areas that were previously untaxed are now included, reflecting Nigeria’s evolving economic realities. This ensures that the system is fair while still encouraging small businesses and individuals to thrive.

For SMEs and individuals, the reforms are largely favourable, offering incentives and exemptions to help ease the transition into this new framework.

Tax Incentives

As new and complicated as these laws might be, there are good aspects to them, which are incentives for individuals and businesses. For instance:

• Low-income earners benefit: If you earn up to 800,000 Naira a year, you won’t pay a dime in tax. That covers many civil servants, teachers, nurses, and other workers outside Lagos who often earn around this threshold. Even if you earn more than 800,000 naira, you only pay tax on income beyond that amount.
  
  
• Rent relief: Individuals who pay rent can deduct up to 500,000 Naira from their taxable income. It’s a small but meaningful way to support people who don’t own property but still carry housing costs.
  
  
• Small business perks: Companies earning under 50 million Naira annually, with assets under 250 million Naira, qualify as “small companies.” These companies are exempt from income tax and VAT, and the threshold may even increase to 100 million Naira in future updates.
  
  
• VAT stays reasonable: The rate remains at 7.5%, keeping essential goods and services—like medical supplies and educational materials—affordable.
  
  
• Withholding tax relief: Small companies earning less than 2 million Naira from a contract don’t have to worry about WHT, meaning they receive full payments.

One of the biggest takeaways here is that the government wants to encourage formalisation. Running your business under your personal name limits your exemptions. Registering as a company not only increases your threshold for tax breaks but also signals that your business is serious, visible, and ready to grow.

Who Is Taxable in Nigeria?

Now that we understand why these laws were introduced and how they benefit us, let’s clear up a question that often confuses people: who actually pays tax in Nigeria under the new rules?

• Residents: You are considered a Nigerian tax resident and liable to pay tax if you spend 183 days or more in Nigeria within 12 months, maintain a permanent home here, or have significant economic ties to the country. In this case, your income is taxable in Nigeria.
  
  
• Businesses: If you operate a business here, it’s taxable, even if the business owner is abroad.
  
  
• Employees: If your employment duties are carried out in Nigeria, your income is taxable.
  
  
• Non-residents: If you live outside Nigeria, you are only taxed on income sourced from Nigeria. However, non-residents earning from startups, creative arts, or technology-driven services are exempt from Nigerian tax on that income.

How Much Tax Will I Pay

Personal Income Tax in Nigeria is calculated using a progressive scale, which means the more you earn, the higher the rate applied to each income band. If you earn ₦800,000 or less in a year, you won’t pay any personal income tax. Earnings above that are taxed in stages:

• Next ₦2.2m: 15%
• Next ₦9m: 18%
• Next ₦13m: 21%
• Next ₦25m: 23%
• Above ₦50m: 25%

Freelancers, Remote Workers, and Foreign Income

For anyone earning from clients outside Nigeria, there are some important points to keep in mind:

• All income earned by Nigerian residents is taxable, regardless of currency.
  
  
• If your client cannot deduct withholding tax, you are responsible for self-declaring your income. Also note that you cannot declare in foreign currency. You must convert your earnings to Naira using the official CBN rate for your tax calculation.
  
  
• Deadlines also matter, as income earned in 2026 should be reported by March 2027.

The speakers emphasised that for freelancers and creators, the new laws represent a shift toward proactive self-declaration, which is becoming standard practice in many countries. Keeping clear records and filing on time will help you stay compliant and avoid surprises.

Cryptocurrency and Digital Assets

In accordance with the 2026 tax laws, cryptocurrency and other digital assets are considered taxable income, just like any other earnings. This means:

• You are taxable when you realise the income, that is, when you sell your crypto and convert it to cash.
  
  
• Increases in value alone—when your crypto rises but you haven’t sold—are not taxed.
  
  
• The authorities expect responsible self-declaration, and over time, they are building systems to track digital transactions more effectively.
  
  

Put simply, once your crypto earnings are realised, they form part of your taxable income. Keeping careful records and staying organised will make compliance far more manageable.

Capital Gains Alignment

Under the 2026 tax laws, capital gains—such as profits from selling stocks or other investments—are now aligned with regular income tax rules. This means:

• All realised income, whether from investments, crypto, or other assets, is taxed at standard rates.
  
  
• Individuals pay up to 25%, while regular companies pay 30%.
  
  
• The distinction between capital gains and other income has been removed to simplify compliance and prevent people from paying different rates for similar earnings.

In practical terms, this makes tax planning easier: any profit you realise, whether from selling shares or digital assets, is treated consistently, giving you clarity on what you owe and when.

Practical Tips for Compliance

To make the most of these reforms, a few simple steps go a long way:

1. Register your business: Moving from a personal business name to a registered company increases your tax exemptions and positions you for growth.
   
   
2. Keep clear records: Track all income—Naira, foreign currency, or digital assets—to make filing straightforward.
   
   
3. Observe deadlines: Income earned in one year should be self-declared by March of the following year.
   
   
4. Leverage available incentives: Exemptions, VAT relief, WHT exemptions, and rent allowances can reduce your taxable income.
   
   
5. Seek guidance when needed: Tax advisors can help with foreign income, crypto, and more complex situations.

The 2026 tax reforms bring clarity, consistency, and new opportunities for individuals, freelancers, and small businesses alike. By understanding the rules, keeping good records, and planning ahead, you can navigate this new framework confidently and take full advantage of the incentives available. If you missed the webinar or want to revisit any part of the discussion, the full session is still available online.

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FAQs from the Webinar

Q: Are all freelancers and small businesses taxed under the new law?
A: Not necessarily. Small companies with revenue under 50 million Naira and individuals earning below 800,000 Naira are largely exempt. Formal registration as a company can increase your exemption threshold.

Q: What makes a company a Nigerian company for tax purposes?
A: Under the Nigeria Tax Act, a company is considered Nigerian and taxed on its global income if it is incorporated in Nigeria, or if its central or effective place of management is in Nigeria. This includes companies registered abroad but managed or controlled from within Nigeria, whether at the board level or through day-to-day operations.

Q: If I earn my income in USD, GBP, or EUR, will I be taxed in Nigeria?

A: Yes. As a Nigerian resident, all income you earn—regardless of currency—is taxable. However, you cannot declare it in foreign currency; you must convert your earnings to Naira using the official CBN rate. If your client does not deduct withholding tax, you are responsible for self-declaring your income. Keeping accurate records and filing on time will help you stay compliant.

Q: What is withholding tax (WHT), and how does it affect me?
A: WHT is a tax deducted by a client or customer from payments made to you. Small companies under certain thresholds are exempt, meaning they receive full payments without deductions.

Q: Does VAT increase under the new law?
A: No. VAT remains at 7.5%, and the reforms aim to reduce costs for essential goods and services.

Q: What happens if I don’t comply with tax requirements?

 A: There are financial penalties for non-compliance. If you fail to register for tax, you’ll be fined ₦50,000 for the first month and ₦25,000 for each month after. If you fail to file your annual tax return, the fine is ₦100,000 for the first month and ₦50,000 for each subsequent month. Staying on top of registration and filing helps you avoid these charges.

Q: Will the government automatically debit my account for taxes?
A: No. Taxes are not auto-debited. You are required to file annual tax returns yourself. Freelancers and solopreneurs must complete the Self-Assessment Form and declare their income accordingly.

Q: Are there penalties for non-declaration?
A: While enforcement is still developing, the law expects self-compliance. Failure to declare could lead to assessments and penalties once authorities have the capacity to track foreign income.

Q: Is my income tax in Nigeria paid on an annual basis and then split monthly, or is it taxed monthly by default?

A: Income tax in Nigeria is calculated and paid annually. You report all your income and determine your tax liability by March of the following year. However, if you earn from an employer who deducts Pay-As-You-Earn (PAYE) tax, it will be collected monthly throughout the year. If you earn income independently, with no deductions at source, you handle it once annually.