Personal income tax: the law

Personal income tax is where most tax practice lives, and under the Nigeria Tax Act 2025 the rules are cleaner than they have ever been. This part teaches the law itself, and it insists on one professional habit: computing a return by hand, so you can check any software, including ours.

Everything starts with residence. A person who is resident in Nigeria, broadly someone present for 183 days or more in any twelve-month period or whose home and life are anchored here, is taxable on their worldwide income, with relief for foreign tax paid. A non-resident is taxable only on income from Nigeria. And for every resident individual, the state of residence assesses the tax, whichever state the employer or client sits in.

The tax base is wide. Employment income counts in full, including benefits in kind. Business, professional and freelance income is taxed on profit, revenue minus the expenses of earning it. Rent, interest and royalties are taxable; dividends from Nigerian companies suffer a final withholding tax instead of joining the bands. The 2025 Act also brought digital and crypto assets squarely into the net, so gains on them belong on the return. On the other side, some income stays out: pensions received under the Pension Reform Act, and the earnings of those on the national minimum wage or less, who are exempt from PAYE entirely.

From gross income, the law allows a short, specific list of deductions: employee pension contributions, National Housing Fund contributions, National Health Insurance premiums, life insurance premiums, and the new rent relief, 20% of annual rent capped at ₦500,000. The old Consolidated Relief Allowance, the ₦200,000-plus-20% formula every Nigerian practitioner knew by heart, is repealed. A 2026 return computed with the CRA is simply wrong, and spotting that mistake in someone else's work is one of the fastest ways a certified agent proves their worth.

What is left after deductions is chargeable income, and the Fourth Schedule bands apply to it slice by slice: the first ₦800,000 at 0%, rising through the middle bands to 25% on chargeable income above ₦50,000,000. The bands are marginal. Crossing into a band never re-taxes what came below it, which is why a raise can never leave anyone worse off after tax, a myth agents spend a surprising amount of time correcting.

The part works two full computations by hand. An employee on ₦6,000,000 who pays ₦1,200,000 in rent and ₦480,000 into a pension ends with chargeable income of ₦5,280,000 and tax of ₦740,400 for the year. A freelancer with ₦3,500,000 of profit and ₦600,000 of rent lands at ₦398,400. Every figure traces to the band table, and both examples are computed by the same code that powers the HopperTax calculator, so the course and the product cannot drift apart.

The part closes with how the tax actually gets paid. Employees pay through PAYE: the employer deducts monthly and remits to the state of residence by the tenth of the following month. The self-employed pay through direct assessment, filing their own returns with their state. Withholding tax deducted from rent, interest or professional fees is an advance, credited against the final assessment, with dividends the notable exception as a final tax. Deadlines and the filing process itself are Part 6's territory; here you learn who owes what, and exactly how much.