New Tax Law: 4 Categories of Nigerians Who Won’t Pay Personal Income Tax in 2026

Nigeria’s sweeping tax reform, which took effect on January 1, 2026, marks one of the most significant overhauls of the country’s personal income tax framework in over a decade. The new rules are aimed at easing the burden on low-income earners, offering measurable relief to the middle class, and rebuilding trust in a tax system many Nigerians view as punitive and unfair.

According to government officials, the reform seeks to strike a balance between revenue generation and social protection, especially as inflation, fuel prices, food costs, and housing expenses continue to rise nationwide.

Below is a detailed breakdown of the four categories of Nigerians who will not pay personal income tax—or will pay significantly less—under the new law, along with expert insights on what this means for workers, employers, and the broader economy.

1. Workers Earning the National Minimum Wage or Less
   Under the new tax regime, any Nigerian earning the national minimum wage or below is fully exempt from personal income tax.
   This is a major shift from previous years, when low-income earners still faced PAYE deductions despite struggling to meet basic needs. The government says the exemption is meant to protect the most vulnerable workers, including cleaners, security guards, junior civil servants, factory hands, and informal-sector employees on structured payrolls.
   Expert Insight
   Tax analysts say this move aligns Nigeria with global best practices, where minimum-wage earners are typically shielded from income taxes.
   “Taxing people who can barely afford food and transportation is economically counterproductive,” one fiscal policy analyst noted. “This exemption could improve worker morale and reduce poverty-related stress.”
2. Nigerians Earning Up to ₦1.2 Million Annually
   Another major beneficiary of the reform is Nigerians earning up to ₦1,200,000 in gross annual income.
   Reports indicate that after statutory deductions and reliefs, this group effectively earns about ₦800,000 in taxable income, which now falls below the revised taxable threshold.
   This category includes:
   Entry-level professionals
   Junior private-sector employees
   Low-paid teachers and health workers
   Small business staff on modest salaries
   Under the new rules, employers are not required to deduct PAYE tax from workers in this income range.
   Why This Matters
   With inflation eroding purchasing power, this exemption could increase take-home pay and help households cope with food, rent, transportation, and school expenses.
3. Middle-Income Earners Up to ₦20 Million (Reduced Tax Burden)
   Middle-income Nigerians earning up to ₦20 million per year are not fully exempt, but they are among the biggest winners of the reform.
   Under the revised PAYE structure:
   Tax bands have been adjusted
   Effective tax rates are lower
   Take-home pay is expected to improve
   This group includes professionals such as:
   Engineers
   Bankers
   Senior teachers
   Mid-level managers
   Business owners on structured salaries
   Economic Perspective
   Economists believe reducing tax pressure on the middle class is crucial for economic stability.
   “The middle class drives consumption, housing, and small business growth,” an economist explained. “Relieving them slightly can stimulate spending and reduce the temptation to evade taxes.”
4. Gifts Are Now Exempt From Personal Income Tax
   One of the most quietly impactful changes is the tax exemption on genuine gifts.
   Under the new law:
   Cash gifts are not taxable
   Property or material gifts are exempt
   Family and ceremonial gifts are protected
   However, tax authorities warn that gifts disguised as regular income or business payments may still be scrutinized.
   Why This Change Was Needed
   In the past, confusion over gift taxation discouraged transparency. The new rule provides clarity and aligns Nigeria’s tax system with international norms.
   Why the Government Introduced These Tax Exemptions
   According to official statements, the reforms were introduced to:
   Reduce hardship for low-income earners
   Improve fairness in income taxation
   Encourage voluntary tax compliance
   Increase disposable household income
   Broaden the tax base without coercion
   Government sources say a fairer system will ultimately lead to higher compliance, as Nigerians are more likely to pay taxes when they feel the system is just.
   Will This Reduce Government Revenue?
   Short term, analysts expect lower PAYE collections from low-income earners. However, experts argue that long-term gains may offset the losses.
   Potential benefits include:
   Higher compliance among middle and high earners
   Reduced tax evasion
   Stronger consumer spending
   Improved public trust in fiscal institutions
   What Workers and Employers Should Do Now
   Employers should review payroll structures immediately
   Employees should confirm their tax status under the new rules
   Workers moving between income brackets should seek tax guidance
   Businesses should maintain clear documentation to avoid disputes
   Frequently Asked Questions (FAQs)
   Will self-employed Nigerians benefit?
   Only those formally assessed under PAYE or structured tax frameworks. Informal workers remain outside the scope unless registered.
   Are bonuses taxed?
   Bonuses are still taxable unless classified as gifts under strict conditions.
   Can states override these rules?
   Personal income tax is regulated nationally, but enforcement is state-based.
   What This Means for Nigeria’s Economy
   If properly implemented, analysts believe the 2026 tax reform could:
   Ease social tensions
   Support consumer-led growth
   Improve tax morale
   Strengthen long-term revenue generation
   However, success will depend on transparent enforcement, public education, and discipline among tax authorities.

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