What you need to know about the exemptions and reliefs that could save you money.

If you’ve been hearing about Nigeria’s new tax reforms and wondering “How does it concern or affect me?”, this is for you.

The Federal Government has passed the Nigeria Tax Act 2025, a sweeping overhaul of our tax system that takes effect on 1 January 2026. 

While the debate has been hot (especially around VAT distribution and CGT), one critical part hasn’t gotten enough attention: 50 new tax exemptions and reliefs designed specifically for low-income earners, ordinary workers, and small business owners.

Basically, Many Nigerians will either pay less tax or no tax at all.

If you’re a salary earner struggling with the cost of living, a small business owner trying to grow, or simply tired of tax issues, these changes could put real money back in your pocket.

In this article, we break down:

  • What these 25 exemptions actually mean
  • Who qualifies (it’s probably you)
  • How much could you save
  • What you need to do to benefit

On 26 June 2025, President Bola Ahmed Tinubu signed four major tax reform bills into law: the Nigeria Tax Act (NTA), the Nigeria Tax Administration Act (NTAA), the Nigeria Revenue Service Act (NRSA), and the Joint Revenue Board Act (JRBA). Together, these laws, referred to in this article as “the Acts” represent the most comprehensive transformation of Nigeria’s tax system in over two decades.

The Acts were designed to remodel the tax ecosystem, strengthen revenue generation, improve the ease of doing business, and ensure more efficient tax administration across federal, state, and local governments.

Naturally, one of the biggest concerns for Nigerians is how these reforms will affect everyday income. Households, salaried workers, small business owners, and investors are particularly anxious about what these changes mean for their take-home pay, especially in a period of high inflation and rising living costs.

The new progressive tax regime aims to deliver real relief for low-income earners, while ensuring higher-income earners contribute a fairer share. But before jumping to conclusions, it’s important to break down exactly how the new rules work and what they mean for you.

This article simplifies the reforms so you can clearly understand how you will be taxed, and how to benefit from the new exemptions and reliefs.

New 2026 Tax Reforms List of Reliefs and Exemptions for Individuals and SMEs

Pay As You Earn (PAYE) 

PAYE is a method of taxation whereby salary is deducted by an employer from an employee's salary and wages. This tax deduction is also known as Personal Income Tax. And under this category this is how you are expected to be taxed: 

  1. Individuals earning the national minimum wage (#70,000 or less are exempted from paying tax.
  2. If your total annual gross income (your full income before any deductions) is ₦1,200,000 or less, you will not pay any Personal Income Tax under the new tax reforms. As it is assumed by the government that after removing allowable deductions (like pension, NHF, etc.), ₦1.2 million usually becomes about ₦800,000 taxable income, and that amount is now fully exempt from tax.
  3. If your total annual gross income (your salary + allowances before any deductions) is N20 million or below, the amount of PAYE tax you will pay will now be lower than it used to be.
  4. Gifts received will also be tax-exempt, so you don't have to be scared when someone gives you money as a gift as it's not taxable.

Allowable Deductions & Reliefs for individuals

These are certain expenses and allowances that a person can deduct from their gross income to lower the amount of income obligated to taxation. Among the allowable deductions are the following: 

  1. Pension contribution to PFA: This refers to the money you contribute every month to your Pension Fund Administrator (PFA) under the Contributory Pension Scheme. For example, let's say you earn ₦500,000 and your monthly Pension contribution is, (8% employee share): ₦40,000. So the Tax is calculated on: ₦460,000 instead of the original ₦500,000.
  2. National Health Insurance Scheme: Contributions you or your employer make to NHIS for health coverage.
  3. National Housing Fund contributions: are the mandatory 2.5% deducted from many employees’ salaries to support affordable housing programs. Meaning that not until after the deduction has been made before the tax amount be deducted.
  4. Interest on loans for owner-occupied residential housing is a situation whereby if you take a mortgage or housing loan to buy/build the home you live in, the interest you pay on that loan is tax-deductible.
  5. Life insurance or annuity premiums: These are payments you make to life insurance companies to protect your family if something happens to you (life insurance), or to help build guaranteed income in the future (annuity). This also signifies that they are deducted from your income before your tax is calculated.
  6. Rent relief: This is one of the most impactful reliefs for everyday Nigerians, especially renters in urban areas like Lagos, Abuja, and other high-end areas. With this measure, the government now allows you to deduct 20% of your total yearly rent from your taxable income, but up to a maximum of ₦500,000. 

Pensions & Gratuities

Pension is a regular, periodic payment to an employee after retirement, while gratuity is a one-time lump-sum payment. Both are retirement benefits provided by employers as a reward for an employee's long service and contribution to the organization. 

  1. Pension funds and assets under the Pension Reform Act (PRA) are tax-exempt, meaning that any money you and your employer contribute to your pension, and the investment returns generated from it (interest, dividends, capital gains), are not taxed by the government.
  2. Pension, gratuity, or any retirement benefits granted in line with the PRA, that is, when you retire and begin receiving your; pension payments, lump-sum gratuity, or any retirement benefits legally approved under the PRA, these amounts are not subject to tax by the government.
  3. Compensation for loss of employment up to N50 million, stating that if you lose your job and your employer pays you a severance package, termination benefit, redundancy package, or compensation for job loss, you will not pay tax on the first ₦50 million you receive. Let's say, you lose your job and they pay you; ₦2m or ₦10m or ₦45m as long as it's not above ₦50m, you will pay zero tax. Only if the compensation is above ₦50 million will the excess be taxed.

Capital Gains Tax (CGT) 

Capital Gains Tax can be defined as a tax on the profit from selling an asset that has increased in value. It's the gain that's taxed, not the amount received. And here are the exemptions of assets under CGT:

  1. Sale of an owner-occupied house: If you sell the house you live in, you don’t have to pay Capital Gains Tax (CGT) on the profit you make. It is believed that this exemption exists because the government doesn’t want to punish people for upgrading their living conditions. Here's a practical example: Let's say, you bought your house in Ikorodu for ₦25m and later sold it for ₦40m, that's a Profit of ₦15m, you will not pay CGT because it’s your primary residence.

Note:

  • The exemption only applies to one home, not additional houses you rent out.
  • If you’re flipping houses or doing real estate business, this exemption does not apply.
  1. Personal effects or chattels worth up to N5 million: this simply means things you own for personal use, not for business purposes. If you sell any of these items and they are worth ₦5m or less, you won’t pay any tax on the sale. For example :
    1. Your personal laptop
    2. Your wedding jewellery
    3. Your art pieces
    4. Household furniture
    5. Personal electronics and a lot more.
  2. Sale of up to two private vehicles per year: this is a situation whereby you can sell up to two of your private cars every year without paying Capital Gains Tax. The aim is to protect normal people who are simply upgrading their cars, not running a car-sale business.
  3. Gains on shares below #150 million per year or gains up to N10 million: this is one of the sweetest regulations as the government won’t tax small and medium investors. Only very large investors or institutional players get taxed above the threshold. The core of this rule is to encourage investment in the stock market. And basically, to note, two exemption routes apply:
    1. If the total amount of shares you sell in a year is less than ₦150m, your gains are tax-free. OR
    2. If your annual capital gains from shares are ₦10m or less, you also pay no tax.
  4. Gains on shares above the exemption threshold if the proceeds are reinvested: also known as Deferred CGT, in other words, if you sell shares and your gains are above the exemption limit, you can avoid paying tax immediately if you reinvest the money back into:
    1. Nigerian companies
    2. Government securities
    3. Approved financial instruments

This is called rollover relief, that is, the tax is deferred, not cancelled, to encourage investors to keep money circulating within the Nigerian economy.

  1. Pension funds, charities, and religious institutions (non-commercial activities only):  Pension funds, charities, and religious institutions remain tax-exempt only when they operate strictly within their core purpose and do not engage in commercial, profit-making activities. 

For pension funds, this means that contributions made by workers, the investment returns earned on those contributions, and the growth of pension assets are all protected from tax so that retirees can receive their benefits without erosion. 

Charities and NGOs also enjoy tax exemption as long as they stick to humanitarian, social, or community-development missions funded by donations or grants; their normal nonprofit activities are not taxed. 

The same applies to churches, mosques, and other religious bodies, they are exempt when funds are used strictly for religious, educational, or social-welfare purposes. 

However, once any of these institutions operates a business venture intended to generate profit, such as a church running a bakery or school that charges high fees, a mosque running a commercial transport fleet, or an NGO selling products as a standalone business, those activities become taxable like any other business in Nigeria. 

In other words, the exemption applies to their spiritual, charitable, or nonprofit roles, but any commercial activity is subject to tax, regardless of who owns it.

Companies’ Income Tax (CIT)

This is also known as Corporate Tax, it is a tax levied on the profits made by companies operating in Nigeria. And here are the exempted ones from tax or have less tax to pay; 

  1. Small companies (turnover not more than N100 million and total fixed assets not more than N250 million) pay 0% tax: this is applicable if your business earns ₦100 million or less in revenue per year and the total value of your buildings, equipment, and other fixed assets is ₦250 million or less, you do not pay corporate income tax. With this development, instead of paying 30% CIT on profits, you keep all the earnings to reinvest.
  2. Eligible (labelled) startups: Startups that meet certain government-defined criteria (e.g., innovative, registered, early-stage, or in specific sectors) will pay no corporate income tax for a defined period. The aim is to encourage entrepreneurship in Nigeria, especially tech, agri-tech, health, or renewable energy startups for economic growth.
  3. Compensation relief: with this If a company raises salaries, gives bonuses, or provides transport allowances to employees who earn low incomes, it can deduct 50% of these amounts from its taxable profit. As this is a measure to incentivize businesses to reward and retain low-income employees without increasing their tax liability.
  4. Employment relief: If you hire new staff and keep them employed for three years, half of their salary can be deducted from your taxable income. This encourages long-term employment and reduces business tax bills, while helping tackle unemployment. For example, let's say a startup hires 10 new employees at ₦100k/month each. After three years, the company can deduct 50% of their total salaries from taxable profit, thereby reducing the tax owed.
  5. Tax holiday for the first 5-years for agricultural businesses: Any company operating in agriculture, whether farming crops, raising livestock, or producing dairy products, pays no corporate income tax for the first five years of operation.
  6. Gains from investment in a labeled and eligible startup by a venture capitalist, private equity fund, accelerator, or incubator are tax-exempt, provided the investment meets the government’s startup-labeling criteria.

Conclusion

We’ve broken down 25 of the 50 tax exemptions and reliefs that will shape how Nigerians work, earn, and build wealth under the new laws. 

If you fall into any of these categories, you now understand where you stand, and how to legally keep more of your money.

Share this with the people you care about. Financial literacy spreads fastest when we help one another.

The remaining 25 exemptions are just as important, and we’ll break those down in our next article.