How to Prepare for the Nigerian Tax Law 2026

If you’ve been following the news, you’ve likely heard names like “Taiwo Oyedele” or phrases like “Tax Harmonization” flying around. But for the average Nigerian business owner or salary earner, the big question remains: What does this actually mean for my pocket in 2026?

The Federal Government, through the Presidential Fiscal Policy and Tax Reforms Committee, is pushing for the most significant overhaul of our tax system in decades. With a targeted effective date of January 1, 2026, the old playbooks are being thrown out.

Here is your guide to understanding the “New Nigerian Tax Regime” and exactly how to prepare before the clock strikes midnight on New Year’s Eve.

1. The “Big Four” Changes You Must Know

The proposed reforms consolidate dozens of confusing taxes into a streamlined system. Here are the pillars that will affect you most in 2026:

• The VAT Hike: Under the proposed Nigeria Tax Bill, Value Added Tax (VAT) is set to increase gradually. While we are currently at 7.5%, the roadmap suggests a jump to roughly 10% in 2025 and 12.5% starting in 2026.

  • Impact: If you sell goods, your pricing strategy needs to change. If you are a consumer, expect shelf prices to rise slightly.

• Relief for Small Businesses: This is the good news. The “Small Business” threshold is being redefined. Generally, if your turnover is ₦50 Million or less, you may be exempt from Company Income Tax (CIT) and arguably VAT compliance obligations.

  • Impact: This is designed to let SMEs breathe. If you are a small vendor, the taxman might finally get off your back.

• FIRS is Changing Name & Power: The Federal Inland Revenue Service (FIRS) is set to become the Nigeria Revenue Service (NRS). This isn’t just a rebranding; the NRS will likely have centralized powers to collect all revenues (including those previously collected by Customs or NIMASA), making them more efficient and data-driven.

• New PAYE Rates: The Personal Income Tax structure is becoming more “progressive.” High-income earners (earning above ₦50m/year) will pay more (up to 25%), while low-income earners (minimum wage level) will be fully exempt.

2. How to Prepare Your Business (Action Plan)

Waiting until January 2026 is a recipe for penalties. Start these steps now:

Step A: Audit Your Turnover Classification

You need to know exactly where you stand. Are you hitting the ₦50 Million mark?

• Action: If you are close to this threshold (e.g., ₦45m–₦55m), your accounting must be precise. Crossing that line brings you into the full tax net (CIT, VAT, etc.). Staying under it keeps you in the “exempt” category.

Step B: Update Your Invoicing Software

Most Nigerian businesses use rigid invoicing software hard-coded to 7.5% VAT.

• Action: Contact your software vendor (Sage, QuickBooks, or custom developers). Ensure your systems can handle a switch to 12.5% instantly on Jan 1, 2026, to avoid under-charging clients and paying the difference from your own profit.

Step C: Clean Up Your Identity (NIN/BVN/TIN)

The new Nigeria Revenue Service (NRS) will rely heavily on technology. They will link your bank accounts (BVN), National ID (NIN), and Tax ID (TIN) to spot discrepancies.

• Action: Ensure your business name matches across all these documents. If you have “Ghost” accounts or undeclared income, the digital dragnet is much more likely to catch it in 2026.

Step D: Review Your Contracts

Do you have long-term contracts that span into 2026?

• Action: Add a “Change in Law” clause. If you sign a contract today to deliver goods in 2026 at a fixed price, and VAT jumps to 12.5%, you will lose money unless your contract allows you to pass that extra tax cost to the client.

3. The Bottom Line

The goal of the 2026 reforms is simplification, not necessarily higher taxation for everyone. The government wants to tax consumption (VAT) and wealth (High Earners) while leaving the poor and small businesses alone.

However, “simplification” often brings “enforcement.” The days of flying under the radar are ending. The best tax-saving strategy for 2026 is transparency—getting your books in order now so you can claim the exemptions you are legally entitled to.

Need to clarify your tax position? Don’t rely on blog posts alone. Speak to a chartered tax practitioner to review your 2025 transition plan.

Watch this discussion on the committee setup: Tinubu Sets Up Committee to Implement 2026 Tax Law

This video is relevant because it features the specific committee established by President Tinubu to oversee the implementation of these tax reforms, giving you insight into the timeline and the people driving the changes.