In June 2025 President Tinubu signed four tax reform laws: the Nigeria Tax Act (NTA), the Nigeria Tax Administration Act (NTAA), the Nigeria Revenue Service (Establishment) Act and the Joint Revenue Board Act. Most of their provisions took effect on 1 January 2026. Together they replace a patchwork of older laws (the Companies Income Tax Act, Personal Income Tax Act, VAT Act and others) with one main tax law.
If you run a registered company, most of what you did before still applies: you still charge VAT, deduct PAYE and WHT, and file annual returns. What changed is who pays what, what you can claim back and who you deal with. This guide covers the changes that matter most for service companies such as agencies, consultancies and IT firms.
What are the biggest changes for companies?
| Area | Before 2026 | From 1 January 2026 |
|---|---|---|
| Tax authority | Federal Inland Revenue Service (FIRS) | Nigeria Revenue Service (NRS) |
| Small company income tax | 0% for turnover under ₦25m | 0% for turnover up to ₦100m and fixed assets up to ₦250m (professional services excluded) |
| Other levies on profit | Tertiary Education Tax, IT levy, NASENI levy, Police Trust Fund levy | One 4% development levy on assessable profit (small companies exempt) |
| Standard company income tax | 30% (medium companies 20%) | 30% for companies that aren't small |
| VAT rate | 7.5% | 7.5% (unchanged) |
| Input VAT on services and assets | Largely not recoverable | Recoverable when it relates to your taxable supplies |
| PAYE | Consolidated Relief Allowance, top rate 24% | First ₦800,000 tax-free, bands from 15% to 25%, rent relief replaces CRA |
Is my company now tax-free?
Possibly. Under the NTA, a small company is one with annual gross turnover of ₦100 million or less and total fixed assets of ₦250 million or less. Small companies pay 0% company income tax and are exempt from capital gains tax and the development levy.
There's an important catch for service businesses: companies that provide professional services cannot be small companies, whatever their size. If you're a consultancy, law firm, accounting practice or engineering firm, plan to pay company income tax. Whether a digital agency counts as "professional services" depends on what it actually does, so ask your tax adviser.
A small company still has to file its annual returns. A 0% rate isn't the same as not filing. Read our full guide to the small company tax exemption.
What is the 4% development levy?
The development levy is a single 4% charge on assessable profits for companies that aren't small. It replaces four separate levies: Tertiary Education Tax, the IT levy, the NASENI levy and the Police Trust Fund levy. It's charged on profit before capital allowances and losses are deducted, so it can be higher than people expect.
Example: A consultancy with ₦180m assessable profit pays ₦7.2m development levy (4% × ₦180m), on top of company income tax. Estimate yours with the company income tax calculator.
What changed about VAT?
The rate stays at 7.5%, but two things matter for service companies:
- You can now claim input VAT on services and fixed assets. VAT you pay on software, professional fees, equipment and similar costs can be offset against the VAT you charge, as long as it relates to your taxable supplies.
- Small companies are exempt from charging VAT. The same small-company definition applies, and professional services are excluded. Many corporate clients still expect VAT invoices, so check before switching VAT off.
VAT returns are still due by the 21st of the following month. See our VAT guide for service companies.
What changed for payroll?
PAYE now uses these annual bands:
| Annual taxable income | Rate |
|---|---|
| First ₦800,000 | 0% |
| Next ₦2,200,000 (₦800,001–₦3m) | 15% |
| Next ₦9,000,000 (₦3m–₦12m) | 18% |
| Next ₦13,000,000 (₦12m–₦25m) | 21% |
| Next ₦25,000,000 (₦25m–₦50m) | 23% |
| Above ₦50,000,000 | 25% |
The Consolidated Relief Allowance is gone. In its place, employees can claim rent relief of 20% of annual rent, up to ₦500,000. Pension (8%), NHF and some other contributions remain deductible. Work through the numbers with our PAYE guide and calculator.
What changed about withholding tax?
WHT is governed by the Deduction of Tax at Source (Withholding) Regulations 2024, which apply from 2025 and continue under the new regime. Resident rates are mostly 5% for consultancy, professional, technical and management fees and commissions, and 2% for supply of goods and construction contracts. Small companies don't have to deduct WHT when the supplier has a valid TIN and the transaction is ₦2 million or less in the month. See withholding tax in Nigeria 2026.
Who collects taxes now?
The Nigeria Revenue Service (NRS) replaces the FIRS and collects federal taxes: company income tax, VAT, the development levy and WHT on payments to companies. PAYE and WHT on payments to individuals still go to the State Internal Revenue Service of the state where the employee or individual lives.
What should a company do now?
- Check whether you're a small company using last year's turnover and your fixed asset register, and whether your work counts as professional services.
- Start keeping supplier VAT invoices so you can claim input VAT.
- Update payroll to the 2026 PAYE bands and collect rent evidence from staff who want rent relief.
- Review your WHT deductions against the 2024 rates, and ask clients for credit notes for WHT they deduct from you.
- Put every deadline in one calendar: VAT and WHT by the 21st, PAYE by the 10th. Here is our 2026 tax calendar.
BizBooks does most of this for you. It applies the 2026 PAYE bands in payroll, tracks VAT and WHT on every invoice, and puts each deadline on a tax calendar with the amount to set aside.
Frequently asked questions
When did the Nigeria Tax Act 2025 take effect?
Most provisions of the Nigeria Tax Act 2025 took effect on 1 January 2026. The four reform laws were signed on 26 June 2025.
Has the VAT rate increased in 2026?
No. VAT remains 7.5%. What changed is that businesses can now recover input VAT on services and fixed assets that relate to taxable supplies, and small companies are exempt from charging VAT.
Do small companies still need to file tax returns?
Yes. A small company pays 0% company income tax but must still register, file annual returns and keep proper records.
Is FIRS still the tax authority?
No. The Federal Inland Revenue Service has been replaced by the Nigeria Revenue Service (NRS). State Internal Revenue Services still collect PAYE.
Does the new law change how much PAYE my staff pay?
Yes. The first ₦800,000 of annual taxable income is now tax-free, and the rates run from 15% to 25%. Most lower and middle earners pay less than before. Some high earners pay more.