Nigeria’s new tax rules took effect from January 1, 2026, as the Federal Government unveiled measures aimed at easing the financial burden on low- and middle-income earners.

Officials say the reforms are intended to make the tax system fairer, encourage compliance, and protect vulnerable households.

Under the revised Personal Income Tax (PAYE) framework, four categories of taxpayers are set to benefit from exemptions or special relief:

• Workers earning the national minimum wage or below

• Employees whose salaries are at or under the minimum wage are fully exempt from personal income tax.

• Low-income earners with gross yearly income up to ₦1,200,000 – Nigerians in this bracket will not pay personal income tax. Reports indicate that this roughly corresponds to a taxable income of about ₦800,000 after allowable deductions.

• Middle-income earners up to ₦20 million yearly – Individuals earning up to ₦20 million per year will enjoy reduced PAYE rates. While not fully exempt, this group will pay lower effective taxes compared to the previous system.

Gifts – The new rules classify gifts as non-taxable, ensuring that receiving genuine gifts will not attract personal income tax.
Rationale for the Reforms

Government officials explained that the changes are designed to protect low-income Nigerians and reduce financial pressure on households struggling with high living costs.

They noted that the reforms would also encourage broader compliance with tax regulations while maintaining sufficient revenue to fund public services.

Economic analysts have welcomed the changes, suggesting that lighter tax obligations could increase disposable income and improve the financial wellbeing of both low- and middle-income earners.

Source: Federal Ministry of Finance / Reports from tax experts.