Nigeria's government has unveiled sweeping changes to the nation's tax system, set to take effect from January 1, 2026. The reforms, introduced under the banner of Nigeria's Fiscal Reforms, promise significant relief for millions of citizens by exempting specific categories of Nigerians from paying personal income tax.
Who Qualifies for Tax Exemption?
Officials have confirmed that the revised Personal Income Tax (PAYE) rules will completely remove the tax burden from four key groups. The primary aim is to ease the financial pressure on low-income earners and small-scale businesses across the country.
The first group includes all individuals earning the national minimum wage or less. This move directly targets the most vulnerable segment of the workforce.
Secondly, citizens with an annual gross income of up to ₦1,200,000 will also be exempt. This threshold translates to an approximate taxable income of ₦800,000.
Extended Relief and New Rules
Beyond full exemptions, the new law offers scaled benefits. Those earning an annual gross income of up to ₦20 million will benefit from reduced PAYE tax rates, providing relief to middle-income earners.
In a notable change, all gifts will be exempt from taxation. This clarification addresses widespread public concern and misinformation that had previously circulated regarding the taxability of personal gifts and transfers.
Government's Rationale and Expected Impact
Authorities explain that these fiscal reforms are designed to promote fairness and protect vulnerable groups within the tax system. By shielding minimum wage earners and low-income citizens, the government aims to stimulate economic activity at the grassroots level.
Tax experts believe the new law could have a transformative effect. It is expected to increase disposable income for millions of Nigerian households, helping them cope with rising living costs. Furthermore, analysts suggest that the reduced rates for middle-income brackets will encourage voluntary tax compliance, ultimately strengthening government revenue collection in the long term.
The reforms come as a direct response to public anxiety, exemplified by cases like that of Helen Duru, a 20-year-old administrative assistant in Ikeja Computer Village. Earning ₦70,000 monthly, her story highlighted the acute financial strain on low-income earners, where mandatory deductions often leave little for survival. The 2026 tax framework seeks to address such realities directly.
