1. What is Personal Income Tax?
Personal Income Tax (PIT) is a tax paid by individuals on the income they earn. This includes salary, business profit, professional fees, rent, commissions, investment income, etc.
Under the 2025 New Tax Law, PIT has been reorganized to ensure better compliance, digital filing, and fairer tax rates.
2. Who Pays Personal Income Tax in Nigeria?
Under the new law, the following individuals must pay PIT:
- Employees (public and private sector)
- Self-employed professionals (lawyers, accountants, engineers, doctors, agents, brokers, artisans, etc.)
- Business owners (registered business names and sole proprietors)
- Landlords receiving rental income
- Anyone earning income from Nigeria whether resident or abroad
What Has Changed Under the 2025 PIT Law?
a. Mandatory Record-Keeping
Every individual earning taxable income must keep basic records:
- Income and expenditure
- Receipts, invoices, bank statements
- Rent receipts (for landlords)
- Daily sales summaries (for small businesses)
NOTES: Fines now apply for failure to keep proper records.
b. Digital Filing and Taxpayer Verification
The law now allows PIT filing completely online through government tax portals.
Taxpayers must verify their identity through:
- NIN
- BVN
- TIN
C. New Progressive Tax Rates
For those earning above the ₦800,000 threshold, the tax rates have been adjusted to be more progressive. Instead of a flat calculation, your tax is calculated in “bands”—you only pay the higher rate on the portion of your income that falls into that band.
- First ₦800,000: 0% (Tax Free)
- Next ₦2.2 Million (₦800k – ₦3m): 15%
- Next ₦9 Million (₦3m – ₦12m): 18%
- Next ₦13 Million (₦12m – ₦25m): 21%
- Next ₦25 Million (₦25m – ₦50m): 23%
- Above ₦50 Million: 25%
d. Goodbye CRA, Hello Rent Relief
The old “Consolidated Relief Allowance” (CRA)—which gave a standard relief of ₦200,000 + 20% of income—is being replaced to simplify calculations.
- New Rent Relief: You can now claim a deduction of 20% of your annual rent or ₦500,000 (whichever is lower).
Homeowners get no rent relief, but they still enjoy the ₦800,000 exemption.
E. Remote Workers and Residency
The new law tightens the definition of a “Tax Resident.” If you have a permanent home in Nigeria or spend significant time here, your global income could be taxable in Nigeria. This is crucial for remote workers earning foreign currency—clarity on your residency status is now more important than ever.
f. Taxation of Side Jobs and Freelance Income
All extra income must now be declared—
including freelance jobs, commissions, agency fees, internet sales, and consulting.
g. Rental Income More Strictly Monitored
Landlords are now required to:
- Issue rent receipts
- Declare rental income annually
- Allow tax authorities to match rental income with bank inflows
3. How PIT is calculated:
PIT is calculated on total taxable income, after deducting:
- Pension (8%)
- NHF (2.5%)
- NHIS (where applicable)
- Allowable business expenses (for self-employed persons)
The balance is taxed using the approved percentage rates.
4. Penalties under the 2025 PIT Law
Failure to comply attracts penalties, including:
- Fines for non-filing
- Interests on unpaid taxes
- Penalties for false statements
- Business closure (for persistent refusal to comply)
5. Why the New PIT Law Matters
The objective of the 2025 PIT reform is to:
- Expand the tax net
- Improve fairness
- Reduce evasion
- Encourage digital tax administration
- Ensure more revenue for states
6. What Individuals Should Do Immediately
To comply easily:
- Keep proper financial records
- File tax returns annually
- Declare all income sources
- Use your TIN and NIN consistently
- Engage a tax consultant if needed
CONCLUSION
The 2025 Personal Income Tax Reform aims to make tax payment simpler, more transparent, and more enforceable. Whether you are a salary earner, entrepreneur, or professional, proper compliance now protects you from penalties and positions you for government benefits tied to verified tax status.