Graphic list of VAT-free essential items in Nigeria including food, medicine, and public transport.

Nigeria’s new tax law for 2025 is a sweeping overhaul that cuts tax for low‑income earners and small businesses, but tightens the net on big earners, digital income, and companies that used to hide in loopholes. It officially kicks in from 1 January 2026, but 2025 is the year everyone has to understand what is coming.

For years, our tax system has been a bit of a jungle, too many laws, too many agencies, and frankly, too much confusion.

But 2025 marks a turning point. The Nigeria Tax Act 2025 is here, and it’s not just another boring policy update; it’s a total reimagining of how the government collects money and, more importantly, how much of your hard-earned Naira stays in your pocket.

What exactly is this New Tax Law?

Think of it as a "renewed hope" as popularly said, of Nigeria’s finances. The government has taken over a dozen messy laws—like the Personal Income Tax Act (PITA) and the Value Added Tax (VAT) Act and compressed them into one unified "Super Law."

The goal? To stop taxing poverty and start taxing prosperity. By simplifying the rules, the Federal Government hopes to make it easier for businesses to breathe while ensuring the wealthiest and biggest corporations pay their fair share.

The Big Changes: What’s different in 2025?

The most significant shift is the progressive nature of the new system. Instead of the "one-size-fits-all" headache we used to have, the law now looks at who you are and what you earn before asking for a cut.

Personal Income Tax (PIT): The brackets have shifted. There is a huge focus on giving low-income earners a break.

Corporate Income Tax (CIT): In a bid to be more "business-friendly," the standard tax rate for companies is dropping from 30% to 27.5% in 2025, with plans to hit 25% by 2026.

The "Development Levy": Say goodbye to the Tertiary Education Tax and NITDA levies. They’ve been replaced by a single 4% Development Levy on company profits to simplify things.

VAT Adjustments: While the base VAT rate is eyeing an increase (moving toward 10% for many goods), there’s a massive list of "essential" things that will now attract 0% VAT.

Who is eligible (and who is off the hook)?

Basically, if you live and earn in Nigeria, you’re under this new regime. This includes:

Salary Earners: Whether you sit in a fancy office in Victoria Island or you’re coding from your bedroom in Owerri, or a freelancer.

Small Businesses: Specifically those with an annual turnover of N50 million or less.

Foreign Companies: If you provide digital services (like streaming or apps) to Nigerians, the taxman is coming for you too. 

What Income is NOT Taxable? (The Good News)

This is where the 2025 law gets interesting for the "average Joe." The government has significantly expanded the list of what they won't touch.


Category What is Tax-Free? Condition / Limit
Low Income Personal Income Tax (PIT) Earning ₦800,000 or less annually.
Housing Rent Deduction 20% of rent (Max ₦500,000 deduction).
Employment Job Loss Compensation Exempt up to ₦50,000,000 severance.
Small Biz Corporate Income Tax Turnover of ₦50 Million or less.
Investment Share Disposal Exempt up to ₦150,000,000 (conditions apply).
Daily Needs Essential Goods (VAT) 0% VAT on Bread, Milk, Fish, and Healthcare.
Retirement Pensions Fully exempt under the Pension Reform Act.

Who Wins the Most?

The clear winner here is the Nigerian Worker earning less than N100,000 a month. By raising the tax-exempt threshold to N800,000 annually, millions of low-income earners will no longer see a single kobo deducted from their paychecks for PIT.

Small Businesses (SMEs) also win big. If your business makes less than N50 million a year, you are largely exempt from Company Income Tax. This is a massive "thank you" to the entrepreneurs keeping the economy alive.

Pros and Cons

The Pros:
More Money for the Poor: The exemption for low-earners is a direct cushion against inflation.

Business Growth: Lower corporate taxes mean companies have more cash to reinvest and hire.

Transparency: Dealing with one unified tax body (the Nigeria Revenue Service) instead of five different ones is a dream for ease of doing business.

The Cons:

VAT Increases: While essentials are free, "luxury" items and non-essentials will get more expensive as VAT creeps up to 10%.

Digital Assets Tax: If you trade crypto or digital tokens, the 2025 law now officially wants a piece of those gains.

Large Company Burden: Multinational giants face a new 15% minimum "Effective Tax Rate," meaning they can’t use "incentives" to avoid paying their fair share anymore.

A Practical Example:

Let’s look at a Nigerian professional earning ₦200,000 per month (₦2,400,000 per year). We’ll assume they pay a modest annual rent of ₦600,000.

Factor Old System (PITA) New Law (2025 Act)
Annual Gross Pay ₦2,400,000 ₦2,400,000
Standard Relief (CRA) ₦680,000 Abolished (₦0)
Rent Relief None ₦120,000 (20% of Rent)
Tax-Free Threshold N/A First ₦800,000 (0%)
Total Annual Tax ~₦249,200 ~₦222,000
Monthly Take-Home ₦179,233 ₦181,500

The Verdict


The 2025 tax law feels like a genuine attempt to modernize Nigeria’s "old-school" finances. It’s a "Robin Hood" style approach, taking a bit more from the digital giants and big corporations while leaving the market woman and the entry-level graduate with more cash in their pockets.

However, the real test will be in the implementation. Will the FIRS (now the NRS) make the filing process as "human" as the law sounds? Only time will tell.