Nigeria Tax Reform 2026: Key Updates to Personal Income Tax

On 26 June 2025, Nigeria enacted several new tax laws, including the Nigeria Tax Act, which introduces significant changes to personal income tax. These amendments affect tax rates, allowances, and the definition of residency for payroll purposes, effective from 1 January 2026.

Legislative summary of changes 

Revision to resident individual definition – Section 2

• • Personal Income Tax (PIT) will now apply to the worldwide income of a resident individual.
  • Residence extends to persons with substantial economic or immediate family ties in a year of assessment.
  • Employment income is taxable in Nigeria only if duties are performed in Nigeria or if the individual is resident there and not taxed in their country of residence.

Benefit-in-kind on premises – Section 15

• • The taxable rental value of employer-provided accommodation is capped at 20% of the employee’s annual gross income (excluding the rental value itself).

Removal of Consolidated Relief Allowance (CRA)

• • The former CRA of NGN 200,000 or 1% of gross income plus 20% of gross income is repealed.
  • These amounts are no longer allowable deductions under section 30 of the Nigeria Tax Act.

Introduction of rent relief allowance – Section 30

• • A new rent relief allowance of 20% of annual rent paid, capped at NGN 500,000 is introduced.
  • Taxpayers must disclose accurate rent information to claim this relief.

Revised individual income tax rates – First Schedule, Part I

The Nigeria Tax Act introduces broader income bands and higher marginal rates for high earners.

• • First NGN 800,000 – 0%
  • Next NGN 2,200,000 – 15%
  • Next NGN 9,000,000 – 18%
  • Next NGN 13,000,000 – 21%
  • Next NGN 25,000,000 – 23%
  • Above NGN 50,000,000 – 25%

Change from capital gains to chargeable gains – Section 42

• • The term capital gains is replaced with chargeable gains.
  • All gains on disposal of chargeable assets are now taxed as part of income at the applicable income tax rates.

Increase in compensation exemption threshold – Section 43

• • The non-taxable threshold for compensation received for loss of office or other damages has increased from NGN 10,000,000 to NGN 50,000,000.
  • Only the excess amount above NGN 50,000,000 is now considered a chargeable gain.

Other Tax Administration Act amendments:

• • Establishment of the Tax Ombuds: The Nigeria Tax Administration Act creates an independent Tax Ombuds office to mediate disputes between taxpayers and tax authorities.
  • Renaming of tax authority: The Nigeria Revenue Service (Establishment) Act repeals the Federal Inland Revenue Service (Establishment) Act and establishes the Nigeria Revenue Service (NRS) as the new national tax body.
  • Consolidation of penalties: Penalties under various tax laws are now unified for consistency. The penalty for late filing increases to NGN 100,000 in the first month and NGN 50,000 for each subsequent month. An NGN 5,000,000 penalty applies for awarding contracts to unregistered taxpayers.
  • Accreditation of tax agents: A formal accreditation regime is introduced for tax consultants and agents representing taxpayers before the NRS.
  • Advance ruling mechanism: Taxpayers can now request binding written clarification from the tax authority on proposed transactions before execution, ensuring transparency and certainty.
  • Tax payment flexibility: Businesses assessed in foreign currencies may pay in Naira at the official exchange rate.

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The Deel Local Payroll Team