Nigerians who earn less than ₦250,000 each month will no longer have to pay personal income tax. This new rule is part of the latest tax laws signed by President Bola Tinubu on June 26, 2025. The change is designed to help low-income families, encourage economic growth, and make the tax system fairer for everyone.
The announcement was made by Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms. Speaking on national television, Oyedele explained that the new tax policy will start on January 1, 2026. He said that people earning below the ₦250,000 monthly threshold are now officially seen as poor and should not be taxed.
Why the Change?
Oyedele said the committee wanted to make sure that the tax system does not put extra pressure on those who are already struggling. The new law is not about raising taxes but about making things easier for the poor and helping Nigeria’s economy grow.
“This tax law will not give you cash in your pocket, but at least it won’t take your cash away if you are poor,” Oyedele explained.
He stressed that the goal is to stop taxing people who do not have enough money for their basic needs, reduce taxes for those in the middle-income group, and only slightly increase taxes for the richest Nigerians.
How Was the Poverty Line Decided?
The committee used both Nigerian and international data to decide who should be considered poor. They looked at the average Nigerian household, which usually has five people and two working adults. After careful calculation, they agreed that a household earning less than ₦250,000 per month should be protected from paying tax.
Oyedele explained that even though some global organizations say the poverty line is about two dollars a day, many Nigerians living in villages grow their own food and spend less on transportation. So, the committee used a local approach to decide what amount is fair.
Who Will Benefit?
With this new law, more than one-third of workers in Nigeria—both in private and public sectors—will be completely free from paying personal income tax. This means millions of Nigerians will have more money to spend on food, education, and other daily needs.
Small businesses will also benefit. Most small and micro businesses will not have to pay corporate income tax, charge VAT, or deduct withholding tax for their workers. This is expected to help small businesses grow and create more jobs.
What About Middle and High Earners?
People who earn between ₦1.8 million and ₦2 million per month, which is about five percent of the population, will see a reduction in their tax rates. The highest earners will pay a bit more, but the changes are designed to be fair and to help close the gap between the rich and the poor.
Oyedele said Nigeria currently collects only about 30 percent of the tax it should be getting. The new tax laws are meant to improve this by making the system easier to understand and harder to cheat.
Extra Relief on Everyday Expenses
The new tax rules also remove VAT from essential items like food, education, and healthcare. Transportation, housing, and accommodation are now also VAT-free. Since these are the main things Nigerians spend money on, the changes should help lower the cost of living for many families.
Conclusion
The new tax law is a big step towards making Nigeria’s tax system fairer and more supportive of the poor. By removing taxes for those earning less than ₦250,000 a month, the government hopes to leave more money in people’s pockets, boost the economy, and encourage more people to pay their fair share. The reforms are set to begin in January 2026 and are expected to bring relief to millions of Nigerians, while also making the tax system simpler and more effective for everyone.
