In a groundbreaking development for Nigeria's fiscal landscape, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has announced that the vast majority of Nigerian workers will be exempted from paying personal income tax when the new regime takes effect in January 2026.
Major Relief for Low and Middle-Income Earners
Speaking at the First Bank SME Connect webinar titled 'Strategies for SMEs: Securing Your Business under the New Tax Law,' Oyedele revealed that no fewer than 98 per cent of Nigerian workers will no longer bear the burden of personal income tax. The reforms are specifically designed to ease the financial pressure on low-income earners while promoting fairness within the tax system.
He provided clear details on the new exemption thresholds. Any individual earning the current national minimum wage of N70,000 per month will be completely exempt from tax. The relief extends even further, covering those earning slightly higher salaries of up to N80,000 or N90,000 monthly. Conversely, only individuals with a monthly income exceeding N2 million will face an upward review in their personal income tax obligations.
Comprehensive Support for Small Businesses and Key Sectors
The tax overhaul introduces a suite of incentives aimed at bolstering small and medium-sized enterprises (SMEs). From 2026, businesses with an annual turnover not exceeding N100 million will be exempt from paying Value-Added Tax (VAT).
To further improve liquidity and operational capacity, withholding tax on services provided by small businesses will be removed. This move is expected to free up crucial capital and enhance cash flow for entrepreneurs.
Operators in the critical sectors of agriculture, healthcare, and education will benefit from a newly introduced zero-rated VAT system. This allows them to reclaim input VAT on their purchases while charging no VAT on their services, effectively reducing their operational costs.
New Protections and Clarifications for Taxpayers
Addressing long-standing concerns about taxpayer harassment, Oyedele announced the creation of a Tax Ombudsman Office. This independent body will be tasked with protecting taxpayers, particularly SMEs, from arbitrary enforcement actions and intimidation. "This new office has been set up particularly to protect small businesses. Nobody would just come and seal up your premises or harass you and take your items," Oyedele assured.
On the topic of capital gains, he clarified that individuals with shareholdings valued at less than N150 million are exempt from the 30 per cent capital gains tax, a provision that covers over 99 per cent of investors in the country.
He also used the platform to dispel widespread misinformation, particularly regarding Tax Identification Number (TIN) requirements for bank accounts. Oyedele explained that the rule mandating TINs for business accounts has been in effect since January 2020, following the 2019 Finance Act. He firmly dismissed speculations about mass account closures or arbitrary debits, confirming that the requirement applies strictly to business accounts, not personal savings accounts.
In related news, the Head of SME Banking at First Bank, Abiodun Famuyiwa, disclosed that the bank disbursed more than N200 billion to small and medium-scale businesses last year, including N100 billion specifically to traders. He reaffirmed the bank's commitment to supporting SME growth through digital products and specialized financing, with a particular focus on women-led enterprises.
