₦airaland Forum

How They Work, Who Pays What, and How Government Will Deduct Tax from Bank Accounts of Individuals and Companies

Tax talk fit dey heavy — so this one na plain English + some Pidgin to make everybody understand “wetin concern me?”. The new tax rules start 1 January 2026 and are some of the biggest reforms in Nigeria in years. Credit: PwC

1. What Are the New Tax Laws?

The Nigerian government combined old tax laws into a modern system under the Nigeria Tax Act (NTA) 2025 and related laws. These laws replace many older laws and modernise how income tax, corporate tax, capital gains tax, VAT and other levies work. Credit: PwC

The main goals:

a. Make tax system simple and fair

b. Protect low-income earners

c. Bring more people and businesses into the tax net

d. Boost government revenue for roads, health, schools and services

2. How Does the New System Work? (Layman View)

Personal Income Tax (PAYE) – Salary Tax

This one na the tax your employer deducts from your salary every month before your money reach your pocket.

Under the new system:

First ₦800,000/year — No tax

₦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% Credit: PwC Tax Summaries

If you dey earn small money, Government no go chop your salary wella. But if your salary don big, dem go cut small higher percentage.

Also, the tax relief system changed — the old “consolidated relief allowance” is gone, replaced by rent relief (up to ₦500,000 deduction if you pay rent and show proof). Credit: Mondaq

3. How Will Government Deduct Tax from Your Salary and Account?

A. Salary (PAYE)

Your employer is responsible:

They calculate how much tax you owe each month.

They deduct it from your monthly pay (that’s what PAYE means — Pay As You Earn).

They then remit (send) that money to the tax authority (the new Nigeria Revenue Service) on your behalf. Baker Tilly Nigeria

Your company go cut am first, then dem send am give Government so e no go reach you again.

B. Bank Accounts & TIN Requirement

Under the new law, every bank account must be linked to a Tax Identification Number (TIN). If you want to open or keep operating a bank account, you must provide a TIN. The bank uses this TIN to report your financial activities to the tax authority. Credit: SimplVest

This linkage enables:

Automatic reporting of your income and transactions above certain limits.

Easier enforcement — Government fit confirm your income through bank entries.

Banks must pass tax payments through a Single Tax Account so tax money goes straight to Government. SimplVest

No TIN, no bank account. Bank go report your money moves to Government, so dem fit know how tax to take.

C. Withholding Tax (WHT)

This is tax deducted “at source” before money hits your account. For example:

If your company pay you a benefit, dividend, rent or interest, the payer may have to deduct tax first and send it to Government.

New WHT rules say deductions happen when the payment is made or settled. Credit: FIRS Tax News

Example: If you earn interest from a corporate investment, some tax might be deducted before the money enters your account. Reuters also reported a directive for banks and brokers to deduct 10% on interest from short-term securities. Credit: Reuters

4. How Do Companies Pay Tax?

A. Company Income Tax

Small companies (turnover ≤ ₦100 million & assets ≤ ₦250 million) — 0% tax (full exemption). Credit: PwC Tax Summaries

Medium and large companies — 25% corporate tax on profit. Credit: PwC Tax Summaries

If your business small small, no tax. If your company big, dem go take 25% from your profit.

B. Development Levy

This is a 4% levy on assessable profit for companies (not small ones) — replacing old multiple levies such as education tax and police trust fund. Credit: PwC

C. Effective Tax for Multinationals

Big companies (turnover over ₦50bn annually or part of a big group) must pay a minimum effective tax of 15% — so if their books show tax below that, they pay a top-up. PwC Tax Summaries

5. How Will Government Deduct Company Taxes?

Companies must:

Calculate their taxes (monthly installments or yearly returns).

Remit payments through banks or the Single Tax Account.

File tax returns regularly showing income, deductible expenses, and tax owed.

If a company fails to remit tax, Government can:

Charge penalties and interest.

If a government ministry/agency owes money, the Accountant-General can deduct what is owed straight from their budget allocation and send to tax authority. Nigerian Investment Promotion Commission

Company no fit play hide. Bank + Government fit pull money sharp sharp if tax no paid.

6. What About Pensions and Gratuity?

Pensions

Pension contributions (money put into an approved pension scheme) can often be deducted or treated favorably, as long as documentation is proper. PwC Tax Summaries

Gratuity

This one is now treated as taxable income — so when a worker retires and gets gratuity, that lump sum can be part of their taxable income. Mondaq

Gratuity no go free again — Government fit tax am as part of your income.

7. How Does the Government Share the Taxes? (Federal vs State)

Under the new laws:

Some taxes are for Federal Government (corporate tax, development levy, etc).

Personal income tax (PAYE) goes to your State Government.

VAT, withholding tax and others are shared by Federal, State and Local Governments under a formula (different percentages allocated to each tier). Nigerian Investment Promotion Commission

Salary tax go State. Company tax go Federal. VAT and others go share among all three.

8. Extra Things You Should Know

A. Wider Tax Net

These laws aim to tax newer income streams:

Digital and foreign incomes for residents

Gains from digital assets (crypto, NFTs, etc.)

Expanded definition of taxable income for individuals and businesses Credit: PwC Tax Summaries

B. Penalty for Non-Compliance

Government now set stricter penalties for:

Not registering for tax

Filing late returns

Not keeping proper records PwC

Pidgin: If you no register or no file returns correct, you fit pay fine plus interest.

9. Real-life Examples (Simple)

Worker Example

If you earn ₦6 million/year:

First ₦800k – no tax

Next ₦2.2m – 15%

Remaining – 18%

Your employer will deduct monthly and send to Government — you don’t pay directly. Credit: PwC Tax Summaries

Small Business

If turnover = ₦80m and assets < ₦250m:

You pay no corporate tax and no development levy — business keeps more money. Credit: PwC Tax Summaries

Big Company

If profit large:

25% company tax

4% development levy

Possible minimum tax obligations. Credit: PwC Tax Summaries

10. Why These Changes Matter

Protects low earners (no tax on first ₦800k)

Encourages small business growth

Modernises tax system

Closes loopholes

Improves revenue collection efficiency via bank & TIN integration

These reforms are meant to make Nigeria’s tax system more fair and easier to administer — but they also mean everyone needs to understand and comply. Credit: PwC

Source: https://thebureaunews.com/nigerias-new-tax-laws-explained-in-simple-english-2026-guide/

Mr tax-master, aka 'Emi Lokan' designing how to milk dry the masses. I wonder why people keep saying that he built Lagos. Warri used to have Mr No More Borrow Borrow. Unfortunately, we now have Mr Borrow Borrow at the helm of the affairs of Nigeria devising ways to sustain the debt incurred.

Thanks, thanks thanks thanks

Total rubbish... just deduct money from Nigerians accounts and see hail next year.

Nigerians are already suffering from Wicked policies, now is the tyranny of taxation, your salary is taxed, you make transfer for goods you buy, you will be taxed for the transfer, the goods you buy, you are paying tax on it, with the money already taxed, by the government and taxed by the Bank.

this is tyranny at its highest wickedness.

Taxing the people to death. When other government are doing everything possible to subsidize and remove taxes from the life of their people.

Taxes are theft.

how about the market women and farmers with no internet access

What about people wey dey do remote jobs?
What about small business owners wey dey hawk?

Evil people, na God go punish una for milking people dry to feed yourselves.

Under the new laws:

Some taxes are for Federal Government (corporate tax, development levy, etc).

Personal income tax (PAYE) goes to your State Government.

I can see a lot happening next year, in term of protesting and more hardship

Where is the pidgin or plain language used here now? Still the usual rhetoric of taxation jargons.

Can't even understand

Explain like you're explaining to a primary one student

Eh God...

This tax thing is not funny oo

The tax law that is already rewritten or the non gazetted one. Please Nigerian news media should stop brainwashing people. This manipulation is enough

Will Churches and mosques, Pastors and Imams pay tax under the new tax policy?

We are not benefiting anything from this stupid government. They still want to tax the hell out of Nigerians. I know France is behind this rubbish. All the money Tinubu has looted since his days as governor to this present day has run into billion of dollars.

What exactly are they doing with the resources if not sharing it among the political elites. Some of us said it back then that a mafia like Tinubu shouldn't be allowed close to the sit of power but they said we were mad. Some played the tribal card but today what is the outcome?

Nonsense.

Still no transparency on how the expenditure for 2025 budget was spent but so much emphasis on taxation. They had earlier sold subsidy removal as the silver bullet, now it's tax. Without accountability, we will only be running round in circles.

They lied again. Low income earners are taxed or are they assuming 100k monthly salary earner earns big,

QUESTIONS & ANSWERS ON THE NEW NIGERIA TAX LAW*

I BELIEVE THE INFORMATION MAY BE USEFUL TO SOMEONE.

(SPECIFIC FOCUS ON INDIVIDUALS AND SMALL BUSINESSES)

🟢 Q1:
When will the new Nigeria Tax Act take effect?

A1:
The new Nigeria Tax Act takes effect from 1st January 2026.*



🟢 Q2:
Which specific individuals does the Nigerian Tax Law apply to?

A2:
It applies to all individuals who earn income in Nigeria (workers, content creators, remote workers, influencers, traders, etc.) and to Nigerians earning income abroad if they are tax residents in Nigeria



🟢 Q3:
Will transfers and deposits into my bank account be taxed?

A3:
NO. Moving money around (via POS, transfers, deposits, or withdrawals) is not a taxable event. What is taxed is income earned.



🟢 Q4:
Will the money I KEEP in my bank account be taxed from 2026?

A4
NO.
Just having money in your account is not taxable.
Only the income you earn (like salary, business profits, or interest) is what can be taxed.



🟢 Q5 :
I’m a student with no job. Will I pay tax in 2026?

A5:
NO.
If you have no taxable income, you won't pay tax.



🟢 Q6:
Will tax authorities now monitor bank accounts of businesses more closely?

A6:
YES,
It will be easier for authorities to track compliance.

However,
Your bank balances will not be taxed; profits and income are.



🟢 Q7 :
Will I pay tax on the loan I borrow from Fairmoney or any lender?

A7:
NO.
Loans are not taxable given that they are not income.

However, the interest income earned by Fairmoney will be taxed in their own hands.



🟢 Q8:
I run a one-man business.

Do I pay personal income tax or company income tax?

A8:
If registered as an enterprise (business name), you pay Personal Income Tax.

If registered as a limited liability company then you pay Company Income Tax.



🟢 Q9:
If I sell shares and make a profit, will I pay tax in 2026?

A9:
NO,
as long as the shares you sold are not more than ₦150 million in value, and the gain is not above ₦10 million.

However, if it is higher than this threshold, the gain becomes taxable.



🟢 Q10:
I am a pensioner.
Will my pension income be taxed in 2026?

A10:
NO.
Approved pension and retirement benefits are exempt from tax.



🟢 Q11:
Are military salaries taxable?

A11:
NO.
The salaries of military officers are now tax-exempt.



🟢 Q12:
Do creatives (authors, musicians, sportsmen) still enjoy tax exemptions on foreign income?

A12:
NO.
They must now pay Nigerian tax on their income earned within Nigeria and outside.



🟢 Q13:
Are crypto gains taxable?

A13:
YES.
Profits from crypto, NFTs, and other digital assets are now taxed.



🟢 Q14:
Who is exempt from personal income tax?

A14:
Individuals earning the national minimum wage or less, and those earning below ₦800,000 annually, are exempt.

🟢 Q15:
What are the new progressive tax bands?

A15:

👉First ₦800,000 @ 0%
👉Next ₦2.2m @ 15%
👉Next ₦9m @ 18%
👉Next ₦13m @ 21%
👉Next ₦25m @ 23%
👉Above ₦50m @ 25%



🟢 Q16:
If I get a big severance package when leaving my job, will I pay tax on it?

A16:
You won't pay tax if it is ₦50 million or less,
BUT if it is more than the extra amount, it will be taxed using the progressive tax band in no 15 above.



🟢 Q17 :
If I earn dividends or rent from abroad,
Will Nigeria tax it?

A17:
Dividends, interests, rent, royalties earned from outside Nigeria are EXEMPT from tax provided they are brought into Nigeria through approved channels (banks).



🟢 Q18:
If a soldier or anyone in the armed forces gets injured in service and starts receiving a disability pension, will it be taxed in Nigeria?

A18:
NO.
The disability pensions earned by the soldier or anyone in the armed forces will be completely tax-exempt.



🟢 Q19:
My uncle wants to start an agricultural company next year.
Will his company be taxed in Nigeria?

A19
NO.
Agricultural companies such as those in crop production, livestock, forestry, dairy, and cocoa processing will enjoy a 5-year tax holiday from the date they begin operation.



🟢 Q20
Is income from Federal or State Government bonds taxable?

A20
NO,
All government bonds are exempt from tax.



🟢 Q21
What does rent relief entail under the new tax law?

A21
YES.
From 2026, individuals can claim rent relief of 20% of the annual rent paid, but capped at ₦500,000.

For instance,
If your yearly rent is ₦5 million, 20% would be ₦1 million, but the law caps it at ₦500,000.

To enjoy this relief, you must declare your actual rent and provide the details to the relevant tax authority.



🟢 Q22
I earn 6m yearly, will I be better off under the new tax law?

A22:
Old law:

👉CRA = 20% of ₦6m (₦1.2m) + ₦200k = ₦1.4m.

👉Taxable income = ₦6m − ₦1.4m = ₦4.6m.

👉Applying old tax bands gives a total tax of ₦896,000.

👉New law (NTA 2025):
* Rent relief = ₦500k (must declare actual rent).

👉Taxable income = ₦6m − ₦500k = ₦5.5m.


👉Applying new bands:
* 👉First ₦800k @0% = 0

* 👉Next ₦2.2m @15% = ₦330k

* Remaining ₦2.5m @18% = ₦450k

* Under the new law, tax reduces from ₦896k to ₦780k, saving ₦116k.

* This will increase your net pay (take-home pay).



🟢 Q23
* If my company's turnover is below ₦50 million, will I pay tax?

A23
NO.
* Small companies with a turnover of less than ₦50m are exempt from taxes.



🟢 Q24
As a remote worker in Nigeria for an international organisation, will I pay tax?

A24
YES,
You will pay tax in Nigeria if the country where the international organisation is based exempts your salary under a treaty or diplomatic arrangement.



🟢 Q25
Will a foreigner earning a salary in Nigeria be taxed?

A25
NO,
if their employer is a start-up,
or operates in tech or creative arts, and their income is already taxed in their country of residence.

All these repetitive articles about the new tax regime only cause more panic among the populace

Imagine if Jonathan had done this many years ago? Just an adjustment of fuel price from N95 to N140 and fuel subsidy removed, the present people in power made NIGERIA ungovernable.

They said Jonathan announced it on the 1st of January and so Jonathan must go.

The same 1st of January, the same people have come with what most Nigerians can't relate with.

The people that occupied Nigeria then, over to you!

Tinubu wey no geh certificate one wunjure us with long tax policy wey long pass PhD literature review..... How do we read and understand all that?

We shall surely survive it.

Editorialtimes:
Source: https://thebureaunews.com/nigerias-new-tax-laws-explained-in-simple-english-2026-guide/

How about remittances and japa'ed people?
Your analysis is not complete

Instead of the purveyors of fake news to read and educate themselves, you will see them skip to the next topic (romance or politics) in a hurry.

Now can any sane person tell me how this new tax laws affect the poor more than the rich?

Dem go tooo deduct my money ehn

if all this pastors of doom and yeyebrities dont pay tax am not paying jack

Oh Nigeria we are going down the drain. No guaranty of improve Security, No good employment and other's. Dear right thinking Nigerians youths, it's high time we Arise against Wickedness in High place's. Revolution now

Just withdraw and give me cash please. Money that's not sufficient to take care of your bills.

Tinubu for 2027.. those people supporting him they will follow us pay tax join.. lol.. thanks to God I will save my money in foreign currency.. I love Tinubu with his reformation of Nigeria

How abt those living outside nigeria bt operating bank accounts wit regular transactions in nigeria

I rushed to see how much they'd tax bet companies and their patrons