For years, small business owners and low-income earners in Nigeria have struggled under the weight of fragmented tax laws and overlapping taxes.
However, with the signing of four major tax reform bills into law, a new chapter may be underway. On Thursday, President Bola Tinubu signed the Nigeria Tax Reforms Bills, the Nigeria Tax Administration Bill, the Nigeria Revenue Service, and the Joint Revenue Board Bill.
The implementation of these laws is set for January 1, 2026, promising to ease the burden on low-income earners while ensuring higher-income individuals contribute more fairly.
You may have heard the news, but you’re probably still wondering; how does this make my life better? Here’s what it means for you as a business owner or a low-income earner.
Impact of the Tax Reform Bills
1. Fill PAYE Exemption for Low-Income Earners (Up to N1 million Per Annum):
If you earn N80,000 per month, your employer likely deducts Pay-As-You-Earn (PAYE) tax before your salary gets to you.
Under the new law, if your annual income is N1 million or less, you’ll keep your full salary, no more PAYE deductions.
That means more money in your hands to meet daily expenses.
2. Zero VAT on Basic Necessities:
Value Added Tax (VAT) will no longer apply to essential items like food, healthcare, education, and electricity.
This means that when you spend N20,000 on food or electricity, you get full value without losing part of it to VAT. This is a direct relief for everyday living.
3. Corporate Income Tax Reduced from 30% to 25%:
For businesses, this tax cut means more available capital for operations, growth and hiring. A 5% tax reduction could be the difference between maintaining your current size and expanding into new markets or products.
4. Tax Exemption Threshold Raised from N25 million to N50 million:
Previously, as a business owner, if your business turnover in a year crosses the N25 million threshold, you have to pay tax.
This sometimes discourages businesses from scaling up, as increased turnover means additional costs without definitely increasing the business’ profit.
However, the increased threshold gives you more room to scale your business to profitability without necessarily incurring additional tax costs, encouraging growth and boosting entrepreneurial spirit.
5. No More Mandatory Audited Financial Statements for Small Businesses:
Small and medium enterprises will no longer be required to submit audited financial statements to file tax returns.
A simplified statement of accounts signed by the business owner will now suffice, saving costs on accounting services.
These tax reforms aim to relieve pressure on everyday Nigerians while creating an environment that supports business growth.
For low-income earners and small business owners, it’s an opportunity to save more, grow more and worry less about tax complexities.
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