Who is exempt from income tax under the new law?
Individuals earning ₦800,000 or less a year pay no personal income tax at all under the Nigeria Tax Act 2025. Progressive rates apply above that threshold, replacing the old tax band structure. This is the headline relief change most reporting on the reform leads with, since it removes a large share of low-income earners from the tax net entirely.
What is rent relief and how is it different from the old CRA?
The Consolidated Relief Allowance (CRA), the old standard deduction every taxpayer got regardless of actual expenses, is gone. In its place is rent relief: a deduction equal to 20% of the annual rent you actually pay, capped at ₦500,000.
- Applies to rent paid for residential accommodation for yourself or your family.
- Available to both PAYE employees and self-employed individuals assessed under personal income tax rules.
- Tied to your actual rent, not a flat allowance everyone received regardless of housing costs.
The practical effect: renters with meaningful rent payments can offset more of their tax bill than the old flat CRA allowed, up to the ₦500,000 cap. If you don't pay rent (for example, you own your home outright), this specific relief doesn't apply to you the way CRA used to apply to everyone.
What changed for severance pay?
The tax-exempt threshold on severance payments, covering job loss or compensation for wrongful termination or injury, rose to ₦50 million, up from ₦10 million previously. This is a large increase, meaning far fewer severance payouts will trigger tax at all compared to the old threshold.
What this page doesn't cover
The Nigeria Tax Act 2025 is a broad reform touching corporate tax, VAT administration, and the creation of the Nigeria Revenue Service (replacing FIRS), among other changes. This page covers only the individual-facing provisions most relevant to a typical worker's payslip: the exemption threshold, rent relief, and severance exemption. If you're a business owner or need the corporate-side changes, consult the official Act text or a tax professional directly, since those provisions aren't summarized here.
People also ask
Does the ₦800,000 exemption apply automatically?
Reporting on the Act describes it as an automatic exemption threshold rather than something you apply for, but confirm with your employer's payroll or a tax professional how it's being implemented on your specific payslip.
Can I claim rent relief if I live with family and don't pay rent directly?
The relief is tied to rent you actually pay for residential accommodation. If you don't pay rent, this specific relief has nothing to apply to, unlike the old CRA which every taxpayer received regardless of housing costs.
Is this the final version of the tax rules, or will they change again?
Treat this as a live policy area. Implementation details are still being clarified by the Nigeria Revenue Service and professional bodies as the law beds in, so specific figures could be refined further. Confirm anything consequential against the official Act text or current NRS guidance before acting on it.