Personal Income Tax in Nigeria: What Changes on 1 Jan 2026 (and How It Affects You)

The big picture (Quick Summary)

• New bands & rates: PIT is now more progressive—0% up to ₦800,000, then rising in steps to 25% above ₦50m.

• Low earners protected: Anyone earning ₦800,000 or less per year pays no PIT.

• CRA is gone; new rent relief: The old Consolidated Relief Allowance is replaced with a rent relief (20% of annual rent, capped at ₦500,000)—documentation is required, and home-owners can’t claim it.

• Go-live date: Reforms take effect not earlier than 1 January 2026 (advisories point to 1 Jan 2026).

The new PIT bands and rates (from 1 Jan 2026)

These brackets come straight from the Fourth Schedule of the new Act.

Note: “Taxable income” is after allowable reliefs/deductions (e.g., pension, NHF/NHIS, rent relief where applicable).

Examples you can sanity-check

(These are illustrative; actual liability depends on your reliefs/deductions.)

• ₦600,000 salary → ₦0 tax (fully within the 0% band).

• ₦3,000,000 salary → 0% on first ₦800k + 15% on ₦2.2m = ₦330,000.

• ₦12,000,000 salary → tax = ₦1,950,000.

• ₦25,000,000 salary → tax = ₦4,680,000.

• ₦60,000,000 salary → tax = ₦12,930,000.

How rent relief works (example):
If you earn ₦12m and pay ₦2m annual rent, rent relief = 20% × ₦2m = ₦400k (below the ₦500k cap). You’re taxed on ₦11.6m instead of ₦12m → liability drops from ₦1,950,000 to ₦1,878,000.

What else changed for individuals

• Residency defined & scope widened: Clearer rules for when you’re resident (economic/family ties), worldwide income for residents, and narrower exemptions for non-residents.

• Benefits-in-kind (valuation rules):

  • Employer housing capped at 20% of gross income as a taxable benefit.

  • Employer-provided assets capped at 5% of cost.

• Loss-of-employment compensation: Tax-exempt up to ₦50m (raised from ₦10m).

• Capital gains now align with PIT: Individuals’ capital gains are taxed at your PIT band (up to 25%); digital/virtual asset gains are taxable with specified exemptions.

• VAT context: The 7.5% VAT rate is retained, but input VAT recovery is broadened (good to know for sole-props/partners).

What employers must do before the switch

1. Update payroll engines to the new bands/rates and to remove CRA from 1 Jan 2026.

2. Collect and store documentation for employee deductions (pension, NHF/NHIS) and rent relief declarations; adjust taxable benefits (housing/assets) per the new caps.

3. Refresh PAYE processes & tables; test January runs before go-live.

4. Communicate changes to staff (net pay impact, how to claim rent relief, evidence needed).

5. Mind the deadlines (until changed by your State IRS):

   • Monthly PAYE remittance: typically by the 10th of the following month.

   • Employer annual return (Form H1): typically by 31 January.

   • Individual annual returns: commonly by 31 March. (States may issue new circulars under the new laws—watch for them.)

What self-employed people should do

• Estimate 2026 tax using the new bands; plan cash flow for higher mid/high-income rates (no CRA).

• Keep records to support deductions (pension, NHF/NHIS, rent relief if you rent business or personal housing as allowed).

• Watch for presumptive-tax rules for informal earners—framework to be issued by the Minister.

Winners & watch-outs

• Winners:

  • Low-income earners (≤ ₦800k)—zero PIT.

  • Renters—targeted relief up to ₦500k (with proof).

• Watch-outs:

  • Mid/high earners—effective tax can be higher because CRA is abolished and top rate rises to 25%.

  • Benefits-in-kind—new caps mean clearer (and often higher) taxable values unless perks are restructured.

Why this matters

The reform simplifies the rules and broadens the base—aiming for fairness and stronger revenue—while protecting low incomes. Implementation quality (payroll updates, documentation, state guidance) will determine how smooth January feels for employers and workers alike.