Will Your Personal Income Tax Go Up or Down in 2026? — The Plain Truth About Nigeria’s New Tax Regime and What It Means for Your Wallet

 

Quick preview — the short answer

Yes — some Nigerians will pay less, many will pay about the same, and a number of higher earners will likely pay more. The new tax system (effective 1 January 2026) creates a cleaner, more progressive Personal Income Tax (PIT) scale, new documented reliefs (rent relief, mortgage interest relief, etc.), explicit taxation of crypto and digital wins, and heavier digital reporting from banks and Virtual Asset Service Providers (VASPs). If you claim the new documented reliefs properly — or if you’re a low-income earner — you’re more likely to be better off. If you’re a high earner who cannot document your deductions, or you earn large sums from previously “hidden” sources (crypto, big betting wins), you may pay significantly more.

 

Introduction: The New Era of Tax in Nigeria

You open a message from your landlord. You open one from HR. But the message that matters most? The tax law that starts on January 1, 2026. This is not a small tweak. It consolidates many old laws into a single, modern framework — the Nigeria Tax Act (NTA) and companion administrative acts — and it rewrites the rules on who pays, how much, and what proof you must show to pay less.

This article tells you how the new personal income tax rules work. It shows real examples and numbers. It gives step-by-step actions you can take so your net pay doesn’t collapse. It challenges you to take control of your finances — not tomorrow, but today.

READ ALSO: The Lie You Tell Yourself About Money (And How It's Keeping You Poor)

1. The new tax rates — the headline that matters

Old top rates were spread and lower-band breaks were different. The new National Tax Act introduces a 0% band for the lowest incomes and then a cleaner progressive scale up to 25% for the very top. The new annual bands (effective Jan 1, 2026) look like this:

New annual taxable income tax bands and rates

• ₦0 – ₦800,000 → 0%
• ₦800,001 – ₦3,000,000 → 15%
• ₦3,000,001 – ₦12,000,000 → 18%
• ₦12,000,001 – ₦25,000,000 → 21%
• ₦25,000,001 – ₦50,000,000 → 23%
• Above ₦50,000,000 → 25%

This replaces the old multiple-slab PAYE structure (with many lower thresholds and smaller percentages). The new bands are broader and front-load relief for the lowest earners.

Why that matters to you?

• If your annual income is below ₦800,000, you pay zero tax. That’s explicit now.
• If you are a low-to-middle income earner, the overall rates and broader lower bands often mean lower PIT than before — provided you claim allowable deductions correctly.
• If you are high income, you may pay more because top bands go up to 25% and reporting rules are tighter.

 

2. The biggest behavioural change: Documentation now matters

Under the old regime, a large portion of reliefs could be taken as standard, automatic allowances (Consolidated Relief Allowance, CRA — often a large percentage of gross pay). The new regime removes the automatic CRA as it used to be. Reliefs now require proof. The law expects receipts, bank statements, stamped leases, pension records, and mortgage statements. No document = no relief.

Practical example

• Old rule: CRA of ₦200,000 + 20% of gross pay often gave informal relief without proof.
• New rule: Rent relief (20% of annual rent up to ₦500,000) only if you can show bank transfers, receipts, and a stamped lease.

Immediate actions

1. Start preserving receipts for rent and mortgage interest.
2. Ensure your HR/Accounts department is filing copies of employee rent receipts.
3. Register contributions to pension funds properly, and keep confirmation docs.

 

3. Rent relief and mortgage interest — a new formal benefit

A clear change: rent relief and interest on mortgage for owner-occupied residence are included as documented reliefs. Rent relief is 20% of annual rent paid subject to a cap of ₦500,000 . If you pay rent in cash and keep no receipts, you can’t claim it.

Illustration (simple)

• Annual rent = ₦1,200,000 → 20% = ₦240,000 → eligible if you have traceable proof
• Annual rent = ₦3,000,000 → 20% = ₦600,000 but capped at ₦500,000

Action steps

• Move rent payments to traceable channels (bank transfers).
• Ask your landlord for stamped receipts or a formal lease.
• Submit copies to your Accounts Dept of your organization and keep your own.

 

4. Crypto, Bet9ja wins, prizes — yes, they’re taxable now

The NTA explicitly includes profits from digital and virtual assets and winnings (including betting and lotteries) as taxable income. That’s explicit now; it’s no longer fuzzy. VASPs and banks will be required to file returns and report cumulative inflows/outflows above thresholds — making it much harder to hide large transactions.

Reporting thresholds

• Individuals: quarterly reporting for customers with cumulative inflows/outflows exceeding ₦25 million.
• Companies: reporting for exceeding ₦100 million.

Example

• If you win ₦10 million at Bet9ja in a month, that is taxable income. If your account sees inflows of ₦26m in a quarter, your bank may report that to tax authorities.

Action steps

• If you earn from crypto or betting, register for a TIN and declare income.
• Keep accurate records of trades, receipts, deposits, and withdrawals.

 

5. Will your net pay increase or decrease? — The numbers

Let’s translate the theory to numbers. Below is a simplified picture adapted from professional calculations and the sample analysis that has circulated among payroll departments. This is a high-level snapshot (actual PAYE depends on allowances, pension, NHF, NHIS, and other local levies).

Table A: Example comparison — selected gross annual pays (illustrative)

Gross annual pay (₦)	Approx. tax under old system	Approx. tax under new system (no rent relief)	New system with rent relief (if claimed)
800,000	₦0	₦0	₦0
1,200,000	₦63,600	₦45,600	₦0 (if rent relief fully claimed)
2,000,000	₦155,600	₦156,000	₦81,000 (if rent relief claimed)
3,000,000	₦299,600	₦294,000	₦219,000
5,000,000	₦608,000	₦618,000	₦528,000
10,000,000	₦1,472,000	₦1,446,000	₦1,356,000
50,000,000	₦8,312,000	₦9,510,000	₦9,395,000

(Numbers are illustrative based on payroll models prepared by accounting firms and the sample PIT impact grid circulated after the NTA; exact PAYE will depend on payroll practice and precise reliefs claimed.)

What this table shows

• For many low-to-middle earners, the new system reduces tax provided you can document reliefs.
• For higher earners (e.g., ₦50m annual), the new system may increase tax liability.
• Differences can be small or large depending on documented rent and allowable deductions.

 

6. Case study 1 — “Chinedu, the bank manager” (practical)

Profile

• Gross annual pay: ₦3,000,000
• Pension contributions: properly documented (8%+).
• Rent: ₦1,200,000 per year (paid by bank transfer; receipt on file).

Old system

• Tax liability (approx): ₦299,600 → net pay after tax ≈ ₦2,700,400

New system

• With rent relief and pension documented: tax liability ≈ ₦219,000 → net pay ≈ ₦2,781,000

Outcome
Chinedu takes home more under the new system because:

• Rent relief capped at ₦500,000 reduces taxable income.
• The 0–800k 0% band helps.

Lesson
If you document your deductions, the new law can improve net pay for mid-income workers.

 

7. Case study 2 — “Ngozi, the crypto trader”

Profile

• Many large crypto trades. Some realized capital gains.
• Bank account had multiple large inflows and outflows in one quarter exceeding ₦25m.

Old system

• Gains were partly unreported or treated inconsistently.

New system

• VASPs and banks must report customers’ significant inflows/outflows (₦25m threshold for individuals). Gains from crypto sales are explicitly taxable as capital gains and/or income, depending on the nature of the activity. Tax authorities get digital trails. Penalties and interest apply for under-declaration.

Outcome

• Ngozi faces higher compliance burden and higher probability of assessment. If she was hiding gains, taxes + penalties will increase her cost.

Lesson
If you are in the virtual asset space, you must formalize and declare. The new law closes the privacy gap.

 

8. The fuel/fossil surcharge — a pricing ripple

A 5% surcharge on chargeable fossil fuel products is included in the law (some exemptions like LPG, CNG). Implementation required executive proclamation; it was delayed but remains legislated. Even when implemented, such a surcharge increases the cost of living and indirectly affects take-home value of pay. Expect indirect pressure on household budgets.

Why it matters to your pocket?

• Even if your PIT falls by a few thousand naira, higher fuel and transport costs can erase the gain.
• Employers may adjust salaries or allowances in response.

 

9. Development levy and company-level changes — why this affects employees

Companies now face a 4% development levy on assessable profits (with small company exceptions). Companies’ tax positions change. That affects budgets for raises, bonuses, allowances, and possibly headcount. Expect firms to review payroll costs, compensation structures, and benefits packages.

What you can do

• Watch company circulars closely in 2026.
• If your employer reduces benefits, negotiate for documented rent/mortgage proof submissions to salvage your take-home pay.

 

10. The enforcement upgrade — digitisation and data flows

The NTA and the Tax Administration Act modernize enforcement:

• Banks and VASPs file returns.
• Tighter data sharing.
• Tax Ombuds and tribunals reorganized for clearer dispute processes.

This is not an idle threat. The new tools make it much more likely the tax authority will discover undeclared incomes.

 

11. Who benefits most? Who loses?

Likely to benefit

• Low-income earners (below ₦800k) — explicit 0% band.
• Mid-income earners who can document pension, rent, mortgage interest.

Likely to lose or face higher tax

• High-net-worth individuals who previously benefited from undocumented reliefs.
• People with large unrecorded incomes (unreported crypto, big betting wins).
• Workers paid largely in non-documented allowances or cash.

 

12. The behavioural checklist — 12 actions to protect your net pay

1. Get a TIN (Tax Identification Number) if you don’t have one.
2. Document everything. Rent receipts. Mortgage interest statements. Pension contributions. Life insurance. NHIS receipts.
3. Pay rent through traceable channels — bank transfer, POS receipts, etc. Keep the stamped lease.
4. Ensure HR has copies of your receipts — ask them to file and submit proof to tax authority if required.
5. Formalize freelance and crypto incomes — register, declare, and keep trade records.
6. Maximise pension contributions that are deductible. Ensure employer remits properly.
7. Use a professional for complex taxes — if you trade crypto or have capital gains, get advice.
8. Check payroll logic — employers must update ERP and payroll systems to new rules. Ask HR if that’s done.
9. Watch bank statements — major inflows may trigger reports. Be prepared.
10. Avoid cash-only big transactions if you want to claim reliefs.
11. Plan salary packaging — consider converting part of your CTC into documented allowances that qualify as reliefs (consult a tax advisor).
12. Keep an emergency tax fund — if your employer delays PAYE corrections, have some buffer.

Most of these are practical, low-cost changes you can implement now.

 

13. Longer-term strategies — more than short-term fixes

• Automate savings and pension top-ups. Contributing more to formal pension vehicles reduces taxable income and builds retirement readiness.
• Formalize business income. If you run a side hustle, keep invoices and incorporate a business where necessary. Small business threshold protection exists (turnover under ₦50m may be exempt for corporate tax), but personal income must be declared.
• Invest in tax-efficient instruments — pensions, owner-occupied mortgages (mortgage interest relief), and tax-exempt accounts where applicable.
• Build a compliance file. Make a physical or digital folder for receipts, lease agreements, and confirmations.

 

14. How this affects small businesses and why payroll matters

Small companies (turnover < ₦50m and assets < ₦250m) benefit from tax exemptions at the corporate level — that does not exempt employees. For payroll, it means fewer withholding complications for small firms but HR must still adhere to PAYE rules. If you own a small business and pay yourself, consult a tax adviser to structure pay versus dividends for tax efficiency.

 

15. Pitfalls to avoid — don’t make these mistakes

• Don’t assume allowances are excluded. Many perks count as taxable benefits.
• Don’t throw away receipts. No proof, no relief.
• Don’t delay registering your digital asset activities. Banks report big flows.
• Don’t assume HR or payroll will automatically claim reliefs for you — be proactive.

 

Conclusion — the final verdict

Will your PIT go up or down in 2026? The answer is: it depends.

• If you are low-income (below ₦800,000) or mid-income and you document allowable reliefs (rent, pension, NHIS, mortgage interest), you will likely be better off.
• If you are high-income and rely on undocumented reliefs or large undeclared gains (crypto, betting), you will likely pay more.
• The overall system is more transparent, more digital, and more enforceable. That means less room for weak bookkeeping and more reward for discipline.

The change is structural. The winners will be those who adapt fast: get documentation in order; register where needed; use pensions and formal housing finance; and engage HR. The losers will be the complacent.