The new Tax Act, which was signed into law in June 2025, has taken effect since January 1, 2026. If you run a business in Nigeria, here’s what changes and what it means for you.
What This Law Does
The new tax act combines several old tax laws into one document. Previously, you had to navigate the Companies Income Tax Act, Personal Income Tax Act, VAT Act, Capital Gains Tax Act, and more. Now, they’re all consolidated into a single framework.
The government says this will make things simpler and reduce confusion. But there are some significant changes you need to know about.
1. Small Businesses Get Major Relief
Small companies with annual revenue of ₦100 million or less are now exempt from Companies Income Tax, Capital Gains Tax, and the new Development Levy. Previously, the exemption threshold was just ₦25 million.
To qualify, your company must have total fixed assets not exceeding ₦250 million.
What this means: If your business falls within these limits, you won’t pay corporate income tax. This could save your business hundreds of thousands or even millions of naira annually.
The government estimates that 97% of small businesses will benefit from exemptions under the new tax structure.
2. Capital Gains Tax Just Got More Expensive
Capital gains tax for companies has increased from 10% to 30%. This means when your company sells assets like property, equipment, or shares, the profit is taxed at the same rate as regular business income.
For individuals, capital gains are no longer taxed separately but are included in your personal income tax calculation.
What this means: If you’re planning to sell company assets or shares, factor in the higher tax cost. This change affects investment decisions and exit strategies.
3. New 4% Development Levy Replaces Multiple Taxes
Companies (except small businesses) will now pay a Development Levy of 4% on their assessable profits. This single levy replaces four separate taxes:
- Tertiary Education Tax
- Information Technology Levy
- NASENI Levy
- Police Trust Fund Levy
What this means: Instead of tracking four different tax obligations, you now have one. The 4% rate might seem high, but it consolidates what you were already paying across multiple channels.
4. Low-Income Workers Pay Zero Tax
Employees earning ₦800,000 annually or less are now exempt from personal income tax. For those earning more, the government introduced a progressive tax system with rates ranging from 0% to 25%.
The consolidated relief allowance has been eliminated and replaced with a rent relief of 20% of annual rent paid, capped at ₦500,000.
What this means: If you employ staff earning below ₦800,000 per year, you don’t need to deduct PAYE tax from their salaries. This reduces your administrative work and gives your lower-paid employees more take-home pay.
5. Big Companies Face Minimum Tax Rate
Nigerian companies with an annual turnover of ₦50 billion or more, or those part of multinational groups earning over €750 million globally, must pay a minimum effective tax rate of 15%.
This means even with deductions, allowances, and tax planning, your actual tax rate cannot fall below 15%.
What this means: Large corporations can no longer use aggressive tax planning to reduce their tax bills significantly. If your effective tax rate is below 15%, you’ll pay a top-up tax to meet this minimum.
What You Need to Do Now
- Check your classification: Determine if your business qualifies as a small company under the new thresholds. If yes, you could save a substantial amount on taxes.
- Review your tax structure: Compare how the Development Levy affects you with the old multiple taxes. Recalculate your expected tax liability.
- Update your payroll system: Make sure your PAYE calculations reflect the new exemption threshold and progressive rates. Employees earning ₦800,000 or less should not have tax deducted from their pay.
- Assess capital transactions: If you’re planning to sell assets or shares, understand how the new 30% capital gains tax affects your returns.
- Get professional help: Tax laws are complex. Consider working with an accountant or tax consultant who understands the new Act.
The Bottom Line
The Nigeria Tax Act 2025 shifts the tax burden. The reforms aim to ease financial pressure on citizens and businesses, stimulating economic activity. Small businesses and low-income workers get significant relief, while larger corporations face stricter compliance requirements.
Whether these changes benefit you depends on your business size and structure. The government insists this isn’t about raising taxes, it’s about creating a fairer, simpler system.
But fair or not, the law takes effect in weeks. Understanding these changes now gives you time to adjust your business strategy and avoid surprises when the new year begins.
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