Tax Exemptions for 2026 in Nigeria

Tax Exemptions for 2026 in Nigeria: What You Need to Know

The tax landscape in Nigeria is set for a major shake-up starting 1 January 2026, driven by landmark reforms aimed at simplifying taxation, easing burdens on individuals and small businesses, and boosting the country’s competitiveness.

In this article, we’ll unpack the key exemptions and reliefs under the new regime, highlight what they mean for different taxpayer categories, and provide practical tips to make the most of the changes.

What’s Changing: The Big Picture

Reform of the Tax Framework

On 26 June 2025, President Bola Tinubu signed four major tax bills into law: the Nigeria Tax Act 2025 (NTA), Nigeria Tax Administration Act 2025 (NTAA), Nigeria Revenue Service (Establishment) Act 2025 (NRSEA), and the Joint Revenue Board (Establishment) Act 2025 (JRBEA).

These reforms consolidate multiple old tax laws (such as the Personal Income Tax Act, Companies Income Tax Act, Capital Gains Tax Act) into more streamlined legislation.

One very significant claim: About 98 % of Nigerian workers will either pay no personal income tax (PAYE) or see a drastically reduced rate under the new regime.

Why It Matters

The changes are partly designed to relieve tax burdens on low- and middle-income earners, boost compliance, and stimulate growth in small business and agriculture.

For taxpayers, this means new thresholds, new exemptions, and a simpler tax filing experience.

For businesses, especially small ones, there are significant reliefs that may change how you plan your operations.

Key Exemptions & Reliefs in 2026

Here’s a breakdown of the major areas of exemptions and how they affect different groups.

1. Individuals & PAYE (Personal Income Tax)

Individuals earning the national minimum wage or less will be fully exempt from PAYE.

Annual gross income up to ₦1,200,000 (approximately translating to taxable income ~₦800,000) will be exempt.

For earnings up to around ₦20 million annually, the law provides reduced rates rather than full exemption.

Gifts are exempt from tax.

Deductions & Reliefs for Individuals

Pension fund contributions, payments into the National Health Insurance Scheme (NHIS), and the National Housing Fund (NHF) contributions will be deductible.

Interest on loans for owner-occupied housing qualifies for relief, as do life insurance or annuity premiums.

Rent relief: up to 20% of annual rent, capped at ₦500,000.

Pensions, Gratuities & Compensation

Pensions, gratuities and retirement benefits under the Pension Reform Act (PRA) remain fully exempt.

Compensation for loss of employment up to ₦50 million is exempt.

2. Capital Gains & Personal Asset Sales

Exemption for sale of owner-occupied homes (subject to conditions).

Personal effects or chattels worth up to ₦5 million are exempt from capital gains tax.

Sale of up to two private vehicles per year exempt.

Gains from share sales below certain thresholds (e.g., gains below ~₦150 million or ₦10 million per transaction) may be exempt; reinvested gains may qualify for relief.

3. Companies, SMEs & Business Income

Companies with turnover ≤ ₦100 million and fixed assets ≤ ₦250 million can qualify for 0% companies income tax (CIT).

Recognised startups get full exemption.

Agricultural businesses (crop production, livestock, dairy) get a 5-year tax holiday.

Small companies are exempt from the 4% Development Levy.

Withholding tax relief: small companies, manufacturers, and agricultural enterprises are exempt.

4. Value Added Tax (VAT) & Goods/Services Exemptions

Basic food items, rent, educational services/materials, healthcare services, pharmaceuticals – many will be 0% rated or exempt from VAT.

Businesses with turnover under ₦100 million need not charge VAT.

Agricultural inputs, disability aids (wheelchairs, hearing aids, etc.), baby products, electric vehicles and parts, humanitarian supplies – VAT exempt.

Timing & Implementation

The effective date for most of these exemptions is 1 January 2026.

Taxpayers and businesses should start preparing now for the transition: updating systems, educating staff/clients, reviewing current tax positions.

Tips to Maximise These Exemptions

1. Ensure you have a valid Tax Identification Number (TIN): Compliance will help you benefit from these exemptions.

2. Keep meticulous records: For rent paid, interest on housing loans, pension contributions, share transactions – good documentation matters.

3. Check eligibility thresholds: Turnover limits (e.g., ₦100 million for businesses) or income caps (₦1.2 million for individuals) determine exemption.

4. Update payroll & accounting systems: For employers and businesses, ensure systems reflect the new thresholds and exemption rules effective Jan 2026.

5. Stay informed about regulations: While these rules are broadly publicised, sectors may have specific guidelines and conditions (e.g., how a startup is defined).

6. Seek professional tax advice: Especially for businesses, high-net-worth individuals, or where asset sales/shares are involved – to ensure you meet conditions and avoid unintended tax liabilities.

Potential Risks & Considerations

Thresholds may encourage behaviours aimed at staying below the limits (e.g., splitting businesses, restructuring assets) — tax authorities may monitor for abuse.

Compliance burden remains: Exemption doesn’t mean no reporting; you still need to comply with filing, documentation and audit standards.

Transitions and timing: While the effective date is Jan 2026, preparatory work is already required. Mistakes in transition could cost you.

Public perception & revenue implications: Given the scale of the exemptions, there is pressure on governmental revenue – tax authorities may tighten enforcement in other areas.

Changes in rate or policy: Tax laws can be amended. While current announcements are solid, staying updated is vital.

Conclusion

The 2026 tax reform in Nigeria marks a new era of greater relief and simplification, particularly for low-income earners, SMEs and certain sectors like agriculture. However, to truly benefit from these exemptions under the new laws (from 1 January 2026) you need to be prepared: understand your status, review your records, update systems and ensure full compliance.

If you’re an individual, check if you fall below the income/exemption thresholds and ensure your deductions are in order. If you’re a business owner, see whether your turnover/assets status qualify you for the tax breaks, and plan your accounting accordingly.

Related Articles: