From 1 January 2026, Nigeria will implement sweeping payroll-related changes following the signing of four major tax reform Acts into law:
The Nigeria Tax Act, 2025, introduces substantive changes affecting employee taxation, benefits in kind, deductions, and tax rates.
Resident individuals are now taxable on their global income.
The definition of a resident has been broadened to include individuals with substantial economic interests or immediate family ties in Nigeria, increasing payroll exposure for internationally mobile employees.
Employer-Provided Assets
Where an employee uses an employer-owned asset (wholly or partly), the taxable benefit is calculated as:
Living Accommodation
Where accommodation in Nigeria is provided rent-free or at below market value, the employee is deemed to receive additional employment income equal to the annual rental value, capped at 20% of gross employment income (excluding the rental value itself).
The Act confirms a list of allowable deductions, including:
The RRA replaces the Consolidated Relief Allowance, which will no longer apply from 2026. All claims must be made in writing and supported by documentary evidence, which tax authorities may request or reject if inadequate.
It is recommended that employers satisfy themselves of the employee’s entitlement to the RRA claim before processing it through payroll.Speak to a Specialist
Loss of Office or Employment
The tax-exempt threshold has increased from ₦10 million to ₦50 million. Amounts exceeding this will now be taxed at progressive rates, rather than a flat 10%.
Low-Income Earners
Employees earning the minimum wage or less are fully exempt from income tax.
Tax Bands
The tax bands have been revised as follows:
If this article raised questions or highlighted areas you’d like to understand better, let’s talk.Our team can walk through the details, implications, and practical considerations for your business.
