For millions of low-income Nigerians, the newly introduced tax reform may not be the threat it initially appeared to be. Despite widespread anxiety following the announcement of the new tax regime by President Bola Ahmed Tinubu, emerging details show that the policy is largely designed to shield the poor while placing a heavier responsibility on high-income earners.
Concerns first surfaced after the President signed the new tax law, with many Nigerians fearing that the reform, which officially took effect on January 1, 2026, would worsen the financial strain already facing households. Social media reactions and public commentary suggested expectations of a difficult year ahead, particularly among low-income earners.
However, clarifications from the Federal Government indicate that these fears may be misplaced. Authorities insist that the new tax framework places little or no burden on low-income Nigerians, while wealthier individuals and high-earning entities are expected to shoulder a larger share of revenue contributions.
Against this backdrop, The Trumpet conducted an in-depth review of the new tax law to address public confusion and separate fact from speculation. Findings show that much of the anxiety stems from limited understanding of the scope and intent of the reforms.
The new tax regime is anchored on four major legislations signed into law by President Tinubu on June 26, 2025. These include the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service Act, and the Joint Revenue Board Act, collectively referred to as “the Nigeria Revenue Acts.”
Together, these laws represent a sweeping overhaul of Nigeria’s tax system, with the stated goals of improving revenue generation, strengthening tax administration at all levels of government, enhancing the ease of doing business, and supporting long-term economic growth.
Although the reforms have generated debate across social and economic classes, low-income earners have been urged to remain calm. Under the new law, individuals earning ₦800,000 or less annually, which translates to about ₦66,667 per month, are completely exempt from Personal Income Tax. This provision is intended to protect the most vulnerable workers, including those earning the national minimum wage or below.
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Beyond income thresholds, the law also provides multiple exemptions designed to reduce the tax burden on ordinary Nigerians. Workers on the current national minimum wage of ₦70,000 per month are not required to pay personal income tax. Pension funds, retirement benefits, and other entitlements paid under the Pension Reform Act remain tax-free. Compensation received for job loss, injury, or defamation is also exempt from tax up to ₦50 million. Additionally, tax relief can be sorted to cover the cost of house rent up to the tune of N500,000 per annual.
The reform further excludes certain investment and asset-related income from taxation. Profits from the sale of a primary residence are exempt from Capital Gains Tax, while gains from the sale of shares in Nigerian companies are not taxable if total proceeds within a 12-month period are below ₦150 million and gains do not exceed ₦10 million. Income earned from Federal Government bonds and select state government bonds is also not subject to tax.
In addition, allowable deductions such as contributions to the National Pension Scheme, National Health Insurance Scheme, National Housing Fund, and life insurance premiums can be deducted before calculating taxable income, effectively lowering tax obligations. Non-cash gifts received by individuals are expressly excluded from taxable income under the new law.
Small businesses also benefit significantly from the reform. Companies classified as small, defined as those with annual gross turnover not exceeding ₦100 million and total fixed assets of ₦250 million or less, are fully exempt from Companies Income Tax, Capital Gains Tax, and the newly introduced Development Levy.
These provisions, taken together, suggest a deliberate policy shift aimed at easing the financial burden on low-income individuals and small businesses, while expanding the tax base among higher earners. By doing so, the Federal Government says it hopes to create a fairer, simpler, and more growth-oriented tax system that balances revenue needs with social protection.
As implementation continues, experts argue that public education and transparency will be critical to ensuring Nigerians fully understand how the new tax law affects them and why, in the government’s view, the burden is now being shifted upward rather than downward.
