EXCLUSIVE: How Nigeria’s New Tax Act Will Affect Your Take-Home Pay – What You Need to Know NOW!
EXCLUSIVE: How Nigeria's New Tax Act Will Affect Your Take-Home Pay – What You Need to Know NOW!
Introduction: A Tax Storm is at the Door!
Nigeria's salary earners are about to face a seismic shift in their take-home pay, as the Nigeria Tax Bill 2024 was finally signed into law by President Tinubu on Thursday, June 26, 2025.
The new tax reforms aim to bring Nigeria's tax system in line with "international standards". But what does this mean for the average worker? Will you end up with more or less money in your pocket?
In this exclusive analysis we break down the current personal income tax rates versus the proposed changes, revealing who wins, who loses, and by how much for various categories of salary earners along the various salary cadres.
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Current vs. New Personal Income Tax Rates: The Shocking Differences
Under the current Personal Income Tax Act (PITA), Nigeria operates a progressive tax system, where higher earners pay more. However, the Nigeria Tax Bill 2024 (awaiting the President's assent to become an Act), although a progressive tax system too, introduces new tax brackets that could possibly if not drastically alter your net income or 'take-home' using the Nigeria's salary-earners parlance.
Below are the current personal income tax rates:
Current Tax Structure (PITA 2011 Amended)
| Income Bracket | Tax Rate |
|---|---|
| First ₦300,000 | 7% |
| Next ₦300,000 | 11% |
| Next ₦500,000 | 15% |
| Next ₦500,000 | 19% |
| Next ₦1,600,000 | 21% |
| Above ₦3,200,000 | 24% |
Here are the personal income tax rates under the new Nigeria Tax Act that President Tinubu assented to on June 26, 2025.
New Tax Structure (Nigeria Tax Act 2025)
| Income Bracket | Tax Rate |
|---|---|
| First ₦800,000 | 0% (Tax-free) |
| Next ₦2,200,000 | 15% |
| Next ₦9,000,000 | 18% |
| Next ₦13,000,000 | 21% |
| Next ₦25,000,000 | 23% |
| Above ₦50,000,000 | 25% |
At first glance, the tax-free threshold jumps from ₦0 to ₦800,000—a win for low-income earners and all personal income taxpayers. But middle and high-income workers may face higher effective tax rates. It should be noted that under the existing tax structure, minimum wage (which is ₦840,000 now) earners are excluded from personal income tax payment.
How Much Will You Lose or Gain?
We crunched the numbers to show exactly how the new tax law will impact different salary brackets especially in terms of their monthly net pay. You should understand here that for all the salary cadre, 8% of the gross pay is calculated for contribution to pension before arriving at the net pay.
Net Pay Comparison: Current vs. New Tax Law
| ANNUAL GROSS PAY | MONTHLY GROSS PAY | CURRENT NET PAY (MONTHLY) | NEW NET PAY (MONTHLY) | DIFFERENCE (MONTHLY) | % CHANGE |
|---|---|---|---|---|---|
| ₦600,000.00 | ₦50,000.00 | ₦46,000.00 | ₦46,000.00 | ₦0.00 | 0.00% |
| ₦840,000.00 | ₦70,000.00 | ₦64,400.00 | ₦64,400.00 | ₦0.00 | 0.00% |
| ₦1,200,000.00 | ₦100,000.00 | ₦86,700.00 | ₦90,700.00 | +₦4,000.00 | +4.61% |
| ₦2,252,008.00 | ₦187,667.33 | ₦156,814.39 | ₦159,255.85 | +₦2,441.47 | +1.56% |
| ₦3,660,952.00 | ₦305,079.33 | ₦247,378.32 | ₦250,651.85 | +₦3,273.52 | +1.32% |
| ₦4,800,000.00 | ₦400,000.00 | ₦320,213.33 | ₦322,260.00 | +₦2,046.67 | +0.64% |
| ₦6,000,000.00 | ₦500,000.00 | ₦394,933.33 | ₦397,700.00 | +₦2,766.67 | +0.70% |
| ₦7,200,000.00 | ₦600,000.00 | ₦469,653.33 | ₦473,140.00 | +₦3,486.67 | +0.74% |
| ₦11,981,562.00 | ₦998,463.50 | ₦767,385.26 | ₦773,740.86 | +₦6,355.60 | +0.83% |
| ₦12,061,562.00 | ₦1,005,130.17 | ₦772,366.59 | ₦778,770.20 | +₦6,403.60 | +0.83% |
| ₦14,000,000.00 | ₦1,166,666.67 | ₦893,066.67 | ₦898,933.33 | +₦5,866.67 | +0.66% |
| ₦60,000,000.00 | ₦5,000,000.00 | ₦3,757,333.33 | ₦3,626,666.67 | -₦130,666.67 | -3.48% |
Key Takeaways:
- ✅ Low-income earners (₦600k–₦1.19M): No change or slight increase in take-home pay.
- ✅ Middle-income earners (₦1.2M–₦13.99M): Marginal gains (₦2k–₦6k more monthly).
- ❌ High-income earners (₦14M+): Biggest losers—those earning ₦60M/year could lose ₦130k monthly!
The new tax law benefits low and middle-income earners but hits high-income workers hard.
What Does This Mean for You?
1. Low-Income Workers (₦0–₦1.19M/year)
- No tax on first ₦800k (vs. ₦300k before).
- Slight increase in net pay for those earning just above ₦1M.
2. Middle-Class Workers (₦1.2M–₦14M/year)
- No tax on first ₦800k
- Small gains (₦2k–₦6k extra per month).
- Effective tax rate drops slightly (e.g., from 13.72% to 13.14% for ₦7.2M earners).
3. High-Income Earners (₦14M+/year)
- Biggest tax hike—those earning ₦60M/year lose ₦130k/month!
- Effective tax rate jumps from 16.85% to 19.47%.
The meaning to all these is that the new tax law is progressive but could discourage high earners. The government is trying to widen the tax net, but the top 1% will feel the pinch. This we believe will really be good for the masses as those who earn big will pay 'bigger'.
(Comment below with your thoughts!)
How to Protect Your Income
To protect your earning, and reduce your personal income tax:
- Maximize Allowances & Reliefs – Ensure you claim all tax-deductible expenses.
- Invest Wisely – Consider tax-efficient investments like pension funds.
- Consult a Tax Advisor – Stay ahead of changes.
Final Verdict: Should You Worry?
If you earn below ₦14M/year, you'll likely see a small boost in take-home pay. But if you're in the top 5%, brace for a heftier tax bill.
The Nigeria Tax Law is a mixed bag—fairer for the masses but a bitter pill for high earners.
What do YOU think? Will this law help Nigeria's economy or hurt productivity? Sound off in the comments!
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