Nigeria’s Tax Law: Lies, Truths, and What Changes from January 1, 2026
At 5:12 a.m., before the rest of her street in Ipaja, a suburb of Lagos, begins to stir, Helen Duru, a 20-year-old, is already awake. She scrolls through her phone while preparing for work, skimming through WhatsApp messages from friends and family.
One message stops her cold.
“From next year, the government will tax every naira that enters your bank account, even gifts, every money. If you don't want to pay government will debit your bank account”.
Source: Getty Images
Helen freezes.
She earns ₦70,000 a month as an administrative assistant at Ikeja Computer Village. By the time Pay-As-You-Earn (PAYE) is deducted and she pays for transport and food, she is often forced to borrow before the next payday arrives.
As she reads the WhatsApp message, several questions flash through her mind: “Every naira? Even gifts?” she mutters as she struggles to prepare for work.
Helen imagines her mother sending N10,000 for food, her sister helping with rent, only for the government to deduct from it. She sighs, heavy and tired.
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Instinctively, she updates her WhatsApp status with the same message screenshot, captioning it:
“We are finished.”
She continues by sending the news to her sister.
"My sister, have you seen this? The government said it will tax all money that comes into our accounts, including gifts."
As she ties her shoelaces, fear follows her. January 1, 2026 is days away.
On the bus to Ikeja, the rumours repeat themselves. People were seen chatting about the new tax law.
The theme of the discussions were exactly her fears, "New taxes are coming in 2026. Every bank alert will be taxed. Government will debit accounts automatically. Online workers and side hustlers are the real targets. Food prices will rise because of tax."
Each claim lands like a blow. Helen does not earn much, but she survives by stretching, borrowing, hustling. She sells small items online sometimes. Her cousin sends money when things are tight.
If all of that is taxed, she wonders, what will be left?
New tax law
Helen's fear is shared by millions of Nigerians as the country prepares to implement its most ambitious tax reform in decades on January 1, 2026.
Later that day, during a break at work, Helen reads more.
Not WhatsApp messages this time, actual explanations of the new tax law on social media. Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms was in a video responding to questions on the new tax.
Slowly, the panic begins to loosen its grip.
She learns that no new taxes are being introduced for most Nigerians. What is changing is how taxes are structured and enforced. In fact, the law says most Nigerians will pay less, or nothing at all.
That message shocks her.
Helen earns N70,000 a month, less than N1 million a year. Under the new law, people like her fall below the income tax threshold.
New tax law is coming: Truth, Lies
The new Tax Reform Act was signed into law by President Bola Tinubu in June 2025. It consists of four major legislations: the Nigerian Tax Act, the Nigerian Tax Administration Act, the Nigerian Revenue Service Establishment Act, and the Joint Revenue Board Establishment Act.
Of these, the Nigerian Tax Act and the Nigerian Tax Administration Act will directly impact individuals and businesses from the first day of the new year(January 2026).
As implementation date draws nearer, the debate around Nigeria’s new tax law has become a battle between truths and lies.
Oyedele and his team have made effort for months to provide clarity of new tax law.
Oyedele has always insisted that the entire essence of this reform is to remove that burden and bring sanity and harmony to how taxes are administered.
He argued
"From January 1, 2026, the vast majority of Nigerians will see a reduction in the taxes they pay."
Despite the efforts, major concerns continue to feature prominently in the debate around taxes under the new law, which takes effect from January 1.
Source: Twitter
LIE 1: “Everyone Will Pay 25% Income Tax”
Few claims have travelled as far or caused as much panic is the idea that Nigerians will soon pay a flat 25% tax on their income.
Verdict: It is not true.
Checks by Legit.ng shows that income is taxed in layers. The 25% tax is for high earners after deductions. Based on the new tax law You have to earn about N240 million a year. That's like 20 million a month to pay 25%.
Here is a snapshot
Monthly Income | Tax Impact |
N80,000 – N100,000 | No income tax |
N150,000 – N500,000 | Lower deductions |
N1m – N2m | Reduced tax |
N3m – N10m | Gradual increase |
N20 million | Up to 25% effective rate |
Only Nigerians earning around N240 million a year begin to approach the top rate—and even then, after deductions.
Truth 1: Millions Will Pay Less or Nothing
According to the reform committee, about one-third of Nigerian workers will be exempt from income tax entirely.
For people like Helen, that means keeping every naira they earn.
How it will work?
- Employees earning N840,000 annually will see their PAYE drop from N32,528 to N0.
- Those earning N1.2 million will pay N42,000 instead of N63,600.
- Even middle-class earners with annual salaries up to N18 million will enjoy reductions ranging from N5,400 to N83,600.
- Only Nigerians earning N30 million and above will face slightly higher taxes, with those earning N60 million annually paying N1.4 million more.
LIE 2: “Government Will Tax Everything in Your Bank Account”
This rumour has perhaps done the most damage. but it is not true. The new tax law only concerns income not gifts.
Wedding gifts, church contributions, remittance from abroad by family and friends are all tax free.
Also, students and those without income will not be taxed
Lies | Truth |
Every bank inflow will be taxed | Only income is taxable |
Gifts are taxable | Gifts and remittances are excluded |
Transfers mean automatic tax | Only declared income is assessed |
For Helen despite her fears, family support, gifts are not income. Refunds, loans and transfers between her own accounts are not income and will not be taxed
What does change from January 1 is enforcement.
The new law strengthens self-assessment, requiring Nigerians to declare what portion of funds received is actually income. So when sending funds it is important the purpose is clearly stated.
Example of transaction description is as follows:
- If a family member sends you money, the narration can be: “Family gift” or “Family support”
- When someone is paying back money they owe you, use: “Refund” or “Expense reimbursement”
- When transferring your own money between accounts, write: “Personal transfer” or “Savings movement”
- If someone lends you money, the narration can be: “Loan proceeds”
- When you put personal funds into your business, write: “Owner capital injection”
- For POS transfers from customers, use: “POS customer transaction”
- For sales payments, customers can write: “Payment for goods supplied” or specify the item purchased
Lies 3- Auto debit of bank accounts
Another rumour had haunted many Nigerians including Helen ahead of new tax law is that the government would simply dip into her account and take tax automatically.
Listening to the explainer on TV, she learns this is also untrue.
There is no automatic debit. Taxes are paid through self-assessment, usually once a year for non-salary earners.
For salaried workers, PAYE continues as before, handled by employers.
The government cannot wake up and empty her account because of tax
Truth: The System will watch more closely
For years, Nigeria’s tax system has relied on weak enforcement and guesswork. The reform aims to change that.
Digital workers, freelancers, and people with multiple income streams will now be expected to declare income more accurately.
But that does not mean harsher taxation.
For Helen who does small online sales when she can. The new tax law protest small earners,
If your total income is below the exemption threshold, you pay nothing. And even for side hustles, tax applies only to profit, not revenue.
Under the new law, businesses earning less than N100 million annually will no longer face automatic withholding tax deductions.
Here is how it works.
Category | Salary | Side Hustle / Business |
Annual Income | N6,000,000 | N10,000,000 |
Tax Deduction | PAYE deducted monthly | Expenses deducted first; tax on profit |
Declaration | Monthly via employer | Declared once per year |
Taxable Amount | Entire salary (after exemptions) | Profit (income minus expenses) |
Key takeaway: Side hustle income is taxed more flexibly, you only pay tax on actual profit, not gross revenue, and you report it annually instead of monthly.
Lies: Food prices will rise because of tax
The truth is VAT on food, education, and healthcare is removed. No increase is expected.
Lies: "Nigeria’s Taxes Are Africa highest"
Even with the reform, Nigeria’s top tax rate remains modest by regional standards.
Countries | Top Income Tax Rate |
Nigeria | 25% |
Ghana | 35% |
Kenya | 35% |
South Africa | 45% |
Lies: Nigerians in the diaspora will be taxed on foreign earnings and remittances sent home.
This is wrong. The tax law clearly states that money sent by parents. remittances from abroad are not taxable.
Existing tax rules, individuals and companies are taxed based on where income is sourced, not merely where it is received.
However, under the new law only income, profits, or gains that arise from Nigeria are subject to tax. The law also introduces unilateral tax relief to prevent taxpayers from being taxed twice on the same income.
Source: Twitter
Source: Legit.ng
