1. The Basics

Taxes fund roads, electricity, schools and public services. In Nigeria, the newly‑enacted tax reform laws take effect from 1 January 2026, bringing changes to how tax is calculated and who pays. Nairametrics+2PwC+2
This doesn’t mean everyone pays the same tax—it means your business needs to review how these changes impact you.

2. Small Companies vs One‑Person Businesses

Registered Companies

Under the reform, a “small company” may qualify for exemptions. For instance:

• A company with annual turnover up to ₦100 million and fixed assets not exceeding ₦250 million is defined as “small”. PwC+2afriwise.com+2
• These small companies are exempt from Company Income Tax (CIT) and the newly‑introduced Development Levy. Vanguard News+2PwC+2

Sole Traders / Business Names

If you operate as a sole trader or a business name (e.g., a makeup artist, tailor, freelancer), you will fall under the rules for personal income tax rather than CIT. Your tax obligation depends on how much you earn personally.

3. Personal Income Tax Still Applies

• Individuals earning up to ₦800,000 per annum will be tax‑exempt under the new regime. PwC+1
• Above that amount, you pay progressive tax up to a maximum of 25%. PwC
• The reform clarifies that digital income, prize winnings, gains from crypto or overseas rent are taxable if they fall under your tax obligation. Cowrywise+1

4. What About VAT and Other Deductions?

VAT (Value Added Tax)

• The VAT rate remains at 7.5%, but essential goods and services are zero‑rated. PwC
• If you provide products or services that attract VAT, you must collect the 7.5% from your customer and remit it.
• Some small businesses under threshold may be exempt from charging VAT. Vanguard News+1

Other Deductions/Levies

• A new “Development Levy” at 4% of assessable profits applies to companies except small companies. PwC
• Withholding tax, stamp duties and other transaction‑based levies still apply depending on the business nature.

5. Penalties for Ignoring the Rules

• Late payment or non‑filing may attract daily interest or fines. Nairametrics
• Filing incorrect or incomplete returns may lead to substantial fines (for individuals and companies).
• Using VAT collected from customers as your own money is treated as misappropriation and could lead to prosecution.

6. What Should a Small Business Owner Do Now?

1. Register for a Tax Identification Number (TIN) if you don’t already have one.
2. File your tax returns even if you owe nothing—this builds your compliance record.
3. Keep basic records: sales, expenses, invoices—use a notebook or a spreadsheet.
4. Determine your category: Are you a small company (registered company) under the threshold, or are you a sole trader?
5. Ask for help: Tax rules have changed. Seek support from a qualified tax advisor or HR consultant (for example, CoreHR Consulting) who understands how to apply these reforms in Nigeria.

7. Let’s Simplify This Together

The 2026 tax reform isn’t about punishing small businesses—it’s about creating a fairer system and ensuring you contribute according to your means. Staying compliant protects you from fines and builds trust with clients and investors.

Call to action: Need help updating your payroll or understanding how these rules apply to your business? Send us a DM to get started. We’ll show you how to structure your finances, stay compliant, and keep growing your business without stress.