The Nigerian Government has introduced a personal income tax calculator giving low-income earners access to a platform, where they can compare their estimated tax payable under the Nigerian Tax Act 2025, against their current pay.
The new development is expected to become operational next January.
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The calculator is designed to achieve transparency in tax administration and protect low-income earners such that “a fair tax system must never punish poverty or weigh down the most vulnerable,” President Bola Tinubu said in a post on X (formerly Twitter) on Thursday.
“With the new tax laws I recently signed, taking effect from January 2026, we have lifted this burden and created a path of equity, fairness, and true redistribution in our economy,” he added, alluding to the new tax regime the country adopted earlier in the year.
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Checks by PREMIUM TIMES showed that the calculator requires users to supply data like gross annual income; NHF, NHIS and pension contributions; life insurance premium, and annual rent to enable it to generate the effective tax rates from both the old and the new laws.
Other details such as the monthly payable tax are also provided by the platform.
For instance, an employee with a gross annual income of N4 million, NHF contribution of N250,000, NHIS contribution N250,000, pension contribution of N1 million, life insurance premium of N400,000 and annual rent of N800,000 will be charged at an effective tax rate of 4.3 per cent under the proposed law, compared to 3.2 per cent under the current law.
Meanwhile, a person with a gross annual income of N1.23 million, NHF contribution of N100,000, NHIS contribution of N100,000, pension contribution of N350,000, life insurance premium of N150,000 and annual rent of N400,000 will be excluded from paying tax, compared to under the current regime where they are chargeable at an effective tax rate of 0.5 per cent.
Individual Nigerians with a monthly income of N108,000 or below and households with a combined monthly income of N250,000 or less are exempted from tax under the law that will take effect from January.
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Lauded as the most comprehensive overhaul of the Nigerian tax system since colonial times, the act exempts people earning N800,000 or lower from tax liability on their personal income or gains. All the same, persons with higher income will be taxed progressively up to 25 per cent of their income.
“The primary objective of this reform is not to raise more tax revenue because if you set out to do a reform in an economy like this with the objective of raising more revenue, you are placing the cart before the horse,” said Taiwo Oyedele, who leads the Presidential Fiscal Policy and Tax Reforms Committee, on Channels TV in June.
“If you don’t address how to stimulate economic activities but you want to collect more taxes, you are chasing shadows,” he added.
The new rules have been developed also to ease the informal economy, which contributes more than half of Nigeria’s GDP, off retrogressive tax burdens, with small businesses (companies with an annual turnover of N100 million and below and total fixed assets of N250 million or less) now excluded from taxes of all forms.
