From January 1, 2026, Nigerians will begin to enjoy a wide range of tax exemptions and reliefs under the new tax reform laws announced by Mr. Taiwo Oyedele, Chairman of the Presidential Fiscal Policy & Tax Reforms Committee.
The reforms, unveiled on November 3, 2025, are designed to ease the burden on low-income earners, average taxpayers, and small businesses, while stimulating investment and economic growth.
The package introduces 50 distinct exemptions and reliefs across personal income tax, corporate tax, capital gains, VAT, stamp duties, and other levies. Below is a breakdown of what they mean for ordinary Nigerians and businesses.
1. Relief for Workers and Low-Income Earners
- Minimum wage earners exempt: Anyone earning the national minimum wage or less will pay no personal income tax.
- Annual income up to ₦1.2m exempt: This protects low-income households from tax pressure.
- Reduced PAYE for middle earners: Those earning up to ₦20m annually will see lower PAYE rates.
- Rent relief: Up to 20% of annual rent (capped at ₦500,000) can be deducted.
- Allowable deductions: Contributions to pensions, health insurance, housing funds, and life insurance premiums are tax-deductible.
Benefit: This directly increases disposable income for workers, reduces the cost of housing, and encourages savings through pensions and insurance.
2. Protection for Retirees and Job Losers
- Pensions and gratuities exempt under the Pension Reform Act.
- Compensation for job loss up to ₦50m exempt.
Benefit: Retirees and those facing redundancy will not lose part of their benefits to taxation, ensuring financial security.
3. Capital Gains Tax Reliefs
- Sale of owner-occupied houses exempt.
- Sale of personal effects up to ₦5m exempt.
- Up to two private vehicle sales per year exempt.
- Small share gains exempt (up to ₦150m annually or ₦10m per transaction).
- Reinvestment relief: Gains above thresholds exempt if reinvested.
Benefit: Ordinary Nigerians selling homes, cars, or modest investments will not face tax penalties, encouraging asset ownership and reinvestment.
4. Boost for Small Businesses and Startups
- Small companies (≤ ₦100m turnover, ≤ ₦250m assets) pay 0% corporate tax.
- Startups exempt from CIT.
- Employment relief: 50% deduction for salaries of new employees retained for at least three years.
- Compensation relief: 50% deduction for wage awards or transport subsidies for low-income workers.
- Agriculture tax holiday: First five years exempt for crop, livestock, and dairy businesses.
Benefit: This reduces costs for small businesses, encourages job creation, and supports food security through agricultural incentives.
5. VAT Exemptions on Essentials
- Basic food items, rent, education, health services, and pharmaceuticals exempt.
- Baby products, sanitary pads, disability aids exempt.
- Agricultural inputs and equipment exempt.
- Transport (shared passenger road transport) exempt.
- Electric vehicles and renewable energy equipment exempt.
Benefit: Everyday essentials become more affordable, while exemptions on renewable energy and EVs encourage sustainable development.
6. Stamp Duties and Transaction Reliefs
- Electronic transfers below ₦10,000 exempt.
- Salary payments exempt.
- Intra-bank transfers exempt.
- Transfers of government securities and shares exempt.
Benefit: This reduces the cost of small transactions, protects workers’ salaries, and encourages investment in securities.
Why It Matters
The reforms aim to:
- Ease the cost of living for households by exempting food, rent, health, and education from VAT.
- Support small businesses and startups with tax holidays and exemptions, fostering entrepreneurship.
- Encourage savings and investment through pension, insurance, and reinvestment reliefs.
- Promote job creation with deductions for new hires and wage support.
- Advance social equity by protecting vulnerable groups—low-income earners, retirees, women, and persons with disabilities.
The Bigger Picture
By reducing the tax burden on essentials and small enterprises, the government hopes to stimulate consumption, expand financial inclusion, and attract investment. Analysts say the reforms could also help formalize more of Nigeria’s economy, as businesses and individuals see clearer benefits in compliance.
In summary: From January 2026, Nigerians will pay less tax on food, housing, healthcare, education, pensions, and small business income. The reforms are expected to put more money in people’s pockets, reduce poverty, and strengthen economic growth.
