The new tax reform was signed into law by President Bola Tinubu in June 2025. It brings together changes across four major laws, but for ordinary workers and businesses, the biggest impact starts in January 2026.
The goal is not to punish people with new taxes. The goal is to simplify the system, remove unnecessary burden, and make tax collection fairer and clearer.
According to the reform committee, the majority of Nigerians will either see their taxes reduced or completely removed.
For workers, this matters a lot. She earns less than ₦1 million a year. Under the new law, people in her category are below the income tax threshold. That means she will not pay income tax at all.
Lie One: “Everyone Will Pay Twenty-Five Percent Tax”
This is one of the most popular and frightening rumours. Many Nigerians believe the government is introducing a flat twenty-five percent tax on everyone’s income. This is false.
Nigeria’s income tax still works in layers. Lower earners pay little or nothing. Higher earners pay more, gradually. The twenty-five percent rate applies only to very high earners, and only after deductions.
To even get close to that top rate, a person needs to earn around ₦240 million in a year, which is about ₦20 million every month. Most Nigerians will never come close to that level.
People earning between ₦80,000 and ₦100,000 monthly will pay no income tax. Those earning modest salaries will see lower deductions. Even many middle-income earners will pay less than before.
The Truth: Many Workers Will Pay Less or Nothing
Under the new law, about one-third of Nigerian workers will not pay income tax at all. Someone earning ₦840,000 in a year will see their PAYE drop to zero.
A worker earning ₦1.2 million yearly will pay less than before. Even those earning up to ₦18 million annually will enjoy noticeable reductions.
Only people earning very high incomes, above ₦30 million yearly, will see slight increases. And even then, the increases are limited.
Lie Two: “Government Will Tax Every Bank Alert”
This rumour caused the most panic. Many people believe every transfer, gift, or support will now be taxed.This is not true.
The law taxes income, not gifts. Money sent by family, wedding gifts, church support, remittances from abroad, refunds, loans, and transfers between your own accounts are not taxable.
Students and people without income are also not taxed. What changes from January 2026 is enforcement. People are now expected to clearly declare what part of the money they receive is income. This is why transaction descriptions matter more than before.
If your mum sends money, it helps to label it as “family support.” If someone is paying you back, “refund” or “reimbursement” is fine. Personal transfers, loans, and savings movements should also be clearly stated. This clarity protects both the sender and the receiver.
Lie Three: “Government Will Automatically Debit Accounts”
Another major fear is that the government will simply wake up and remove money from people’s bank accounts.This is also false.
There is no automatic debit. Salaried workers will continue under PAYE, handled by employers. Non-salary earners will still file taxes through self-assessment, usually once a year. The government cannot empty your account without due process.
What Really Changes: Closer Monitoring, Not Harsher Tax
For years, Nigeria’s tax system has been weak in enforcement. The new law improves monitoring, especially for people with multiple income sources like freelancers and digital workers.
But better monitoring does not mean higher taxes. If your total income is below the exemption threshold, you still pay nothing. If you run a side hustle, tax applies only to profit, not total sales. Expenses are deducted first.
Small businesses earning under ₦100 million yearly will also enjoy relief, as automatic withholding taxes are removed.
Other Common Lies Explained Simply
Many people fear food prices will rise. The truth is that VAT on food, education, and healthcare has been removed. Prices are not expected to rise because of tax.
Some believe Nigeria now has the highest tax rates in Africa. This is wrong. Nigeria’s top rate remains lower than Ghana, Kenya, and South Africa.
Others think Nigerians abroad will be taxed on foreign earnings or remittances sent home. This is false. Only income earned in Nigeria is taxed. Money sent from abroad remains tax-free, and safeguards exist to prevent double taxation.
Who Will Not Pay Tax at All?
Workers earning the national minimum wage or less are exempt. Anyone earning below ₦800,000 yearly pays no income tax. Military salaries are tax-free. Death benefits and redundancy payments are also not taxed.
What January 2026 Really Means
For some workers, January 2026 does not mean disaster. It means relief. It means keeping more of what they earn. It means fewer deductions for low and middle-income earners and a clearer system that focuses on fairness. The fear came from rumours. The reality is very different.