Full List of Nigerians Who Will Pay Tax in 2026 and Those Who Will Not

Nigeria will introduce a new Progressive Income Tax System starting January 2026. The major goal of this reform is to create a fairer tax structure where the level of tax paid increases as income increases. Low-income earners remain fully exempt, while higher earners will contribute more based on their earnings.

This new structure is designed to promote equity, support economic stability, and improve government revenue without placing undue pressure on vulnerable households.

How the New Progressive Tax Works

Under the new tax system, only income above 800,000 naira per year becomes taxable. Anyone earning less than this amount pays nothing. Tax rates then increase in stages, applying progressively to different parts of an individual’s income.

The rates include 15 percent, 18 percent, 21 percent, and 23 percent depending on how much a person earns annually.

Below is a clear breakdown of how much tax individuals will pay at different annual income levels.

Progressive Tax Breakdown for Selected Annual Earnings

Annual Income	Tax Calculation	Total Tax Payable
800,000 naira	Income below taxable threshold	0 naira
2.2 million naira	(2.2m – 800k) × 15%	210,000 naira
9 million naira	First 800k = 0%
800k – 3m (2.2m) × 15% = 330,000
3m – 9m (6m) × 18% = 1,080,000	1,410,000 naira
13 million naira	Amount taxed up to 9m = 1,410,000
Extra 4m × 21% = 840,000	2,250,000 naira
25 million naira	Amount taxed up to 13m = 2,250,000
Extra 12m × 21% = 2,520,000	4,770,000 naira
50 million naira	Amount taxed up to 25m = 4,770,000
Extra 25m × 23% = 5,750,000	10,520,000 naira

Who Will Pay the New Progressive Income Tax?

The policy applies mainly to individuals or businesses earning above 800,000 naira a year. The target groups include:

1. Government and Private Sector Employees (PAYE Workers)

Workers who earn more than about 66,600 naira monthly will have tax automatically deducted under the Pay As You Earn system. This ensures accuracy and proper remittance to tax authorities.

2. Business Owners and Self-Employed Individuals

Registered business operators, freelancers, entrepreneurs, and anyone earning taxable profit above 800,000 naira per year must file a self-assessment tax return. This includes documenting income, expenses, and profit.

3. Professionals

Doctors, lawyers, engineers, architects, ICT experts, consultants, and others who earn above the taxable threshold from professional services must comply with the new tax structure.

Who Is Exempt From Paying This Tax?

The new tax system does not affect everyone. To protect the most vulnerable households, the following groups are exempt:

• Individuals earning less than 800,000 naira per year.
• Informal sector workers who are not formally registered, such as market sellers, small artisans, and street vendors.
• Farmers involved in subsistence agriculture without any registered agribusiness entity.

These exemptions ensure that low-income earners and small informal workers are not burdened by taxation under the new structure.

Why the Progressive Tax System Matters

The introduction of a progressive tax model marks a major shift in Nigeria’s approach to building revenue. Some key benefits include:

• Ensuring a fairer distribution of tax responsibilities.
• Reducing pressure on low-income households.
• Increasing government revenue for public services and infrastructure.
• Bringing Nigeria’s tax structure closer to international best practices.
• Improving transparency and accountability in tax administration.

If well-implemented, this reform could strengthen the country’s fiscal stability and reduce income inequality.

Conclusion

Nigeria’s new Progressive Income Tax System, set to begin in January 2026, represents one of the most important tax reforms in recent years. By exempting low-income earners and placing a proportionate responsibility on higher-income groups, the system aims to balance fairness with revenue needs.

Workers, business owners, and professionals earning above the threshold should begin preparing ahead of the implementation date. Proper awareness and compliance will determine the long-term success of this new tax model and its impact on the country’s economic development.