Tax Law: What Government Employees Need to Know as New Tax Law Takes Effect
- The new tax law which began on January 1, 2026 introduced sweeping changes aimed at easing the burden on low-income earners
- Officials confirmed that the first ₦800,000 of annual income would now be tax-free, exempting nearly all Nigerian workers from PAYE
- Reform leaders said the measures were designed to create a fairer tax system, reduce corporate rates, and strengthen economic governance
Government workers were told that under the new tax law, the first ₦800,000 of annual income would now be tax-free. This meant that individuals earning ₦800,000 or less per year, which equates to about ₦66,667 monthly, were fully exempt from tax on both income and gains.
Federal government explained that income above ₦800,000 would be taxed progressively, with rates rising in bands up to 25 per cent for earnings above ₦50 million.
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Middle-income earners between ₦1 million and ₦10 million were expected to see slightly lower effective tax rates.
Workers were advised to ensure that their PAYE tables, deductions such as pension, NHF/NHIS, rent relief, insurance, and mortgage, as well as documentation, were updated before January 2026.
PAYE exemptions for majority of workers
Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr. Taiwo Oyedele, disclosed that between 97 and 98 per cent of Nigerian workers were exempted from the pay-as-you-earn (PAYE) tax under the new law. He added that the Federal Government generated about ₦3.36 trillion in revenue last year.
Speaking at the 31st Nigerian Economic Summit (NES31) in Abuja in 2025, Oyedele explained that the reforms, scheduled to take effect from January 2026, were designed to shield low-income earners and those living close to the poverty line from additional financial burdens.
Corporate tax rate reduction
Oyedele stated that the new laws were expected to reduce the corporate tax rate from 30 per cent to 25 per cent. He emphasised that the reforms were part of wider efforts to create a fairer and more efficient tax system that encouraged compliance while supporting inclusive economic growth.
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Governance and accountability in revenue
The chairman explained that the reforms were designed to improve governance around revenue generation, including tax collection and accountability in spending.
He noted that when Nigeria’s economy improved, sovereign credit ratings would rise, revenue would be sufficient to run government operations, and borrowing costs would fall for both government and the private sector.
Oyedele described the reforms as being in the country’s “enlightened self-interest.”
Public engagement and controversy
Oyedele recounted that initial controversy around the reforms had actually increased public awareness. He said that before the debate, engagement sessions attracted fewer than 100 people, but afterwards, rooms were filled beyond capacity.
He explained that the committee engaged with every sector, using reports from the National Bureau of Statistics (NBS) and gross domestic product (GDP) data to hold discussions one by one.
Four categories of Nigerians exempted from paying tax
Legit.ng earlier reported that Nigeria’s Fiscal Reforms announced that from January 1, 2026, new tax laws would come into effect, offering relief and exemptions to low-income earners, average taxpayers, and small businesses.
Officials said the changes were designed to ease the financial burden on citizens and encourage compliance with tax regulations.
Source: Legit.ng
