The Nigeria Tax Act 2025 (Key Updates for 2026)
The Nigeria Tax Act 2025 introduces significant reforms to payroll taxation and employee benefits, with full implementation and enforcement expectations strengthened in 2026.
Annual incomes up to ₦800,000 remain exempt from Personal Income Tax, while higher income bands are taxed progressively up to 25%. A major structural change is the replacement of the Consolidated Relief Allowance with rent-based reliefs, allowing employees to claim 20% of annual rent paid, capped at ₦500,000.
Tax-free redundancy or loss-of-employment compensation has increased substantially from ₦10 million to ₦50 million, with any excess subject to tax.
Key 2026 Points to Note:
• Employers are now expected to fully align payroll systems with the new tax structure, with stricter enforcement by the Federal Inland Revenue Service.
• There is increased focus on audit and compliance reviews, particularly around employee benefits and relief claims.
• Documentation requirements for rent relief claims are being more closely scrutinised to prevent abuse.
• Organisations are advised to update HR policies and employment contracts to reflect the new tax treatment of benefits and redundancy payments.
• The reforms are being positioned to better reflect inflation and cost-of-living realities, improving employee net income at lower bands.
Overall, the Act aims to enhance employee protection, simplify relief structures, and drive improved tax compliance across organisations.
