New Nigeria Tax Reforms: A Guide to the 2026 Fiscal Transition

Effective Date: January 1, 2026
‍Regulatory Body: Nigeria Revenue Service (NRS) - formerly FIRS

Executive Summary

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‍Nigeria is embarking on a historic transformation of its fiscal landscape. The new tax reforms consolidate legacy laws into a single, modern framework designed to promote equity, simplify administration, and expand the tax net. For employers and employees, this necessitates a total overhaul of payroll logic, the retirement of the Consolidated Relief Allowance (CRA), and the introduction of evidence-based reliefs.

1. Revised Personal Income Tax (PIT) BracketsThe reform introduces a significantly higher tax-free threshold to protect low-income earners, while implementing a steeper progressive scale for high earners.

The following table:

Impact: Individuals earning approximately ₦66,666 per month or less are now completely exempt from income tax.

2. The End of Consolidated Relief Allowance (CRA)The old CRA system, which provided an automatic, formula-based deduction of ₦200k or 1% of gross income plus 20% of gross, has been abolished. Previously, the CRA was a "blind" relief that required no documentation. It has been replaced by a system of specific, targeted reliefs, primarily centered on housing and actual expenses.

3. New Rules: Rent Relief vs. Accommodation BenefitsThe 2026 reform creates a clear distinction between employees who pay their own rent and those provided with housing by their employers.

A. Rent Relief (For Employees paying their own rent)This is a deduction used to reduce taxable income.

• The Rule: Employees can claim 20% of their actual annual rent paid, subject to a maximum cap of ₦500,000.
• Employee Requirements: This is not automatic. Employees must provide a valid Tenancy Agreement and Rent Receipts. The NRS may also require the Landlord's Tax Identification Number (TIN) to verify the claim.

B. Accommodation Benefit (For Company-provided housing)This is a Benefit-in-Kind (BIK) added to an employee's taxable income.

• The Rule: The taxable value of employer-provided housing is now limited to a maximum of 20% of the employee's annual gross income.
• Benefit: Even if a company pays ₦10 million for a luxury apartment, if the employee's salary is ₦20 million, they are only taxed on ₦4 million (20%) of that housing benefit.

4. Capital Gains and Remote WorkCapital Gains Tax (CGT): The flat 10% rate for individuals is abolished. Gains from the sale of assets (including digital/virtual assets like cryptocurrency) are now taxed at the individual's standard progressive rate (up to 25%).Remote Workers: Nigerian residents working for foreign entities must now declare and pay tax on their worldwide income, regardless of where the payment is deposited.

5. Compliance and Employer Obligations

• Mandatory TIN: By January 1, 2026, all taxable persons must have a TIN to operate bank accounts.
• Severance Pay: Tax exemptions on severance payments have increased to ₦50 million, providing better protection for exiting employees.
• Penalties: Employers face a 40% penalty for failure to deduct or remit taxes, alongside heavy fines for engaging with unregistered vendors.

Nigeria 2026 Tax Reforms FAQs

Q: When do the new Nigeria tax reforms come into effect?A: The reforms are effective from January 1, 2026.

Q: Which government body is responsible for these changes?A: The regulatory body is the Nigeria Revenue Service (NRS), formerly known as the Federal Inland Revenue Service (FIRS).

Q: What has happened to the Consolidated Relief Allowance (CRA)?A: The CRA has been abolished. The old system of automatic, formula-based deductions (₦200k + 20% of gross) is replaced by evidence-based reliefs, primarily focused on housing and actual expenses.

Q: What is the new tax-free income threshold?A: Individuals earning ₦800,000 or less annually (approximately ₦66,666 per month) are now taxed at 0%.

Q: How does the new Rent Relief work for employees?A: Employees who pay their own rent can claim a deduction of 20% of their actual annual rent, subject to a maximum cap of ₦500,000. This is not automatic; employees must provide a Tenancy Agreement, Rent Receipts, and potentially their Landlord’s Tax Identification Number (TIN).

Q: How is company-provided housing (Accommodation Benefit) taxed now?A: The taxable value of housing provided by an employer is now capped. It is limited to a maximum of 20% of the employee's annual gross income, regardless of the actual cost of the property.

Q: How are Capital Gains (including cryptocurrency) taxed?A: The previous flat 10% Capital Gains Tax (CGT) rate for individuals is abolished. Gains from assets, including digital assets like cryptocurrency, are now taxed at the individual's standard progressive Personal Income Tax rate (up to 25%).

Q: Do remote workers for foreign companies need to pay tax?A: Yes. Nigerian residents working for foreign entities are required to declare and pay tax on their worldwide income, regardless of where the payment is deposited.

Q: Are there new requirements for operating a bank account?A: Yes. By January 1, 2026, all taxable persons must have a Tax Identification Number (TIN) to operate bank accounts.

Q: How has the tax exemption on severance pay changed?A: The tax exemption threshold for severance payments has been increased to ₦50 million, offering better protection for employees leaving their jobs.

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