The new tax reform has been signed and will be implemented starting in the 2026 fiscal year.
The new tax law has earmarked N800,000 as the cut-off annual income threshold below which the Nigerian Revenue Service and State Inland Revenue Services will charge no personal income tax. For corporates, a turnover figure of N100 million has also been set as the trigger to pay Company Income Tax.
There are also several deductions available to personal taxpayers, including 20% of rent paid, capped at a maximum of N500,000.
The question today is how this will impact operations from January 2026. Will your bank account be charged a tax? Will your employer pay a tax on your behalf?
Let’s answer these questions.
1. If I earn below N800,000 as income as an individual, should I file a tax return?
The answer is yes. Every taxpayer must file a tax return, irrespective of income. The law states in Section 29 that:
“Where for all practical purposes, the income of a person chargeable to tax under this Act cannot be ascertained or records are not kept in such a manner as to enable proper assessment of income, then such person shall be assessed on such terms and conditions as may be prescribed by the Minister on the advice of the Joint Revenue Board in a regulation under a presumptive tax regime.”
In simple terms, even if you qualify for a tax break or earn less than N800,000, it’s still your responsibility to file and keep records. Otherwise, the taxman can charge you taxes using a presumptive tax regime.
2. Who files the taxes — my employer?
Actually, you do, for many reasons. First, the burden to claim a tax deduction has shifted to the taxpayer.
In the current tax system, you receive a 20% payroll deduction automatically. The new tax reform removes the automatic deduction and replaces it with deductions based on contributions to your Retirement Savings Account, life insurance premiums, National Housing Fund, and National Health Insurance Scheme.
This means that to receive your full annual deduction, you must file an individual tax return that captures your claimed deductions — even if your employer files on your behalf.
3. What if I earn income through immoral means, like prostitution? Do I pay taxes on that income?
The taxman is not going to adjudicate whether your economic activity is moral or otherwise; if you make income, he wants a share.
In October 1931, Al Capone was found guilty on five counts of income tax evasion and sentenced to 11 years in federal prison for not paying taxes on his illegal activities.
In the U.S., the IRS reminds taxpayers of this income reporting requirement annually in Publication 525, Taxable and Nontaxable Income. I quote the IRS here:
“If you receive a bribe, include it in your income.”
4. Will bank balances and transfers be taxed?
Simply receiving income or retaining cash in your bank account does not automatically result in a tax assessment. Turnover or assets are not taxed; instead, net profits and interest earned on cash deposits are subject to tax.
Summary
A return must be filed by you for all income to avoid a presumptive tax assessment by the authorities. Best practice is to keep proper records and follow the advice of your accountant.
Credit: Nairametrics
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