2025 Law Guide — Nigeria Tax Act explained

Who Must File

If you earn income in Nigeria, you must file.

The Nigeria Tax Act 2025, signed into law on 26 June 2025 and effective from 1 January 2026, requires every individual who earns income to file a personal annual tax return — regardless of how much they earn or whether tax is actually due.

This applies to you if:

You earn a salary from an employer (even if your employer already deducts PAYE)
You run a business, trade, or freelance work
You earn rental income from property
You earn investment income (interest, dividends)
You earn income from digital or virtual assets (crypto, tokens)
You received a prize, award, honorarium, or grant

Even if you earn below ₦800,000 per year (the tax-free threshold), you must still file a nil return. The obligation is to file, not just to pay.

Your employer's PAYE deduction does NOT replace your personal filing obligation. PAYE is your employer's duty to remit tax monthly. You have a separate duty to file an annual return covering all your income sources.

How Your Tax Is Calculated

The six tax bands

Your taxable income (after deductions) is taxed progressively — meaning different portions of your income are taxed at different rates. Lower income is taxed less, higher income is taxed more.

Your chargeable income	Tax rate
First ₦800,000	0% (tax-free)
₦800,001 – ₦3,000,000	15%
₦3,000,001 – ₦12,000,000	18%
₦12,000,001 – ₦25,000,000	21%
₦25,000,001 – ₦50,000,000	23%
Above ₦50,000,000	25%

For example: if your chargeable income is ₦5,000,000, you don't pay 18% on all of it. You pay 0% on the first ₦800,000, then 15% on the next ₦2,200,000 (= ₦330,000), then 18% on the remaining ₦2,000,000 (= ₦360,000). Total tax: ₦690,000.

Use the FileTax calculator to see exactly how your income falls across these bands — with a visual breakdown.

What You Can Deduct

Deductions that reduce what you owe

Before the tax bands are applied, you can subtract certain amounts from your total income. These are called eligible deductions — they reduce your chargeable income, which reduces your tax.

Under the NTA 2025, the old Consolidated Relief Allowance (CRA) has been abolished. In its place, these specific deductions apply:

Pension Contribution

If you work for a company with 3 or more employees, your employer deducts 8% of your basic salary plus housing and transport allowances for your pension. This amount is deductible. Self-employed individuals can contribute voluntarily.

Where to find it: Check your payslip for 'Pension' or 'RSA Contribution'.

Rent ReliefNEW

20% of your annual rent, up to a maximum of ₦500,000. This is new under the 2025 law — most people don't know about it, and it can save you up to ₦500,000 in taxable income.

Example: If you pay ₦2,000,000/year in rent, your relief is 20% × ₦2,000,000 = ₦400,000.

National Housing Fund (NHF)

Previously compulsory at 2.5% of basic salary. Now voluntary for private-sector workers. If your employer still deducts it, it's deductible from your tax.

Where to find it: Check your payslip for 'NHF'.

National Health Insurance (NHIS)

Your health insurance contribution, if your employer enrolled you in the scheme. Deductible from taxable income.

Where to find it: Check your payslip for 'NHIS' or 'NHIA'.

Life Insurance Premiums

Premiums you pay on a personal life insurance policy or deferred annuity (not employer group life) are deductible.

Housing Loan Interest

Interest paid on a mortgage or loan used to build or buy your own home (that you live in, not investment property) is deductible. Only the interest portion, not the full repayment.

What Changed from the Old Law

Old law vs. new law — the key differences

What	Old Law (PITA)	New Law (NTA 2025)
Tax-free threshold	₦300,000	₦800,000
Consolidated Relief Allowance	Higher of ₦200K or 1% of gross, plus 20% of gross	Abolished — replaced by specific deductions
Rent relief	Did not exist	20% of rent, capped at ₦500,000
Tax bands	7%, 11%, 15%, 19%, 21%, 24%	0%, 15%, 18%, 21%, 23%, 25%
Minimum tax	1% of gross income	Abolished for individuals
Capital gains	Flat 10%	Taxed at your income tax rate
Non-filing penalty	₦25,000 first month + ₦5,000/month	₦100,000 first month + ₦50,000/month
Gratuity	Exempt	Now taxable (outside pension fund)
Filing requirement	Required but loosely enforced	Required for ALL earners, strictly enforced

Where and How to File

Filing is done on your state's portal

Personal income tax in Nigeria is administered by the state where you live — not the federal government. Each state has its own Internal Revenue Service and its own online portal.

The filing window opens on 1 January and closes on 31 March each year, covering the previous year's income.

Abia