The New Tax Act And What It Means To The Everyday Nigerian Business Owner

Nigeria’s new tax law reform is expected to take full effect on January 1, 2026. And contrary to the popular opinion on what the new tax laws might mean for you as a business owner, this new tax law is designed to modernise taxation, broaden the tax base, and enhance accountability for businesses and individuals.

For merchants, POS operators, and business owners using Moniepoint, understanding what’s changing and how to stay compliant is essential to avoid penalties and business disruptions.

We have put together this practical, no-jargon guide on what the new tax laws mean for you and your business.

Why the New Tax Act Matter

The new Nigeria Tax Act focuses on:

• Better tracking of taxable income through tools like Tax IDs and clearer records.
• Clear definitions of what is taxable, non-taxable, and deductible.
• Capturing more businesses and individuals, including those in the informal sector, into the tax system.

From 2026, businesses that are not properly registered or tax-compliant may face restrictions, audits, or heavy penalties, some amounTax IDg to millions of naira. 

If You Run More Than One Business

For tax purposes, your business is separate from you as an individual.

• Each business is taxed separately based on its registration.
• A Business Name is taxed under Personal Income Tax Act.
• A Limited Liability Company is taxed under the Companies Income Tax Act.
• You must also file your personal tax return as an individual.
  
  

Owning multiple businesses doesn’t mean higher taxes; it means separate, fair assessments for each one.

Here are the steps to know as we enter this new tax regime.  

Step 1: Register Your Business Properly

The foundation of compliance is business registration.

• Limited Liability Companies (LLCs) must be registered with the Corporate Affairs Commission (CAC) and have an RC number.
• Registered Business Names must also be registered with CAC and have a BN number.
• Individuals operaTax IDg informal businesses are still expected to comply with Personal Income Tax laws.
  

From 2026, businesses that are not registered may struggle to operate on platforms or partner with compliant institutions.

Step 2: Get and Use Your Tax Identification Number (Tax ID)

A Tax ID is mandatory under the new tax regime.

• Companies and business names are identified by their TaxID.
• Individuals are tracked primarily by Tax ID, with NIN, BVN, or phone number used where necessary.
• To create a Tax ID, please use the new Joint Revenue Board link here
• To link your Tax ID to your Moniepoint account, please contact your Business relationship manager.

Without a Tax ID by January 2026, you may face restrictions beyond Moniepoint that affect your ability to do business generally.

Step 3: Separate Business and Personal Money

This is one of the most essential changes many business owners overlook.

If you run your business through a personal account:

• It may be difficult to separate business and personal income. Also, valid business expenses will be  mixed with personal spending, and each  can’t be clearly identified for tax purposes. 
• When your records are unclear, tax authorities may assume most of the money that came into your account is income and charge tax on it, even when the source of income is not taxable. The same applies to business expenses that should be tax deductible.

Using a dedicated Moniepoint Business Account helps:

• Clearly separate income from expenses.
• Show your actual profit by properly documentingg your income and business expenses, which is what tax is calculated on.
• Protect you from inflated tax assessments, account flags or freezes.

Step 4: Understand What You’re Actually Taxed On

One important thing to understand about Personal Income Tax (which applies to individuals and business names) is this:

Only individual employees are taxed on income, business names pay personal income tax on their profit not income. Also, it is not a flat rate. You are not taxed one single percentage on your profit .. , Instead, Nigeria uses a progressive tax system, meaning each portion of your income is taxed at a different rate as your income increases.

Here’s the tax breakdown:

This means your business profit is taxed at different rates.

Let’s Make It Real With Examples

Example 1: You made  ₦200,000 profit in a year

• This falls entirely within the first ₦800,000
• Tax payable: ₦0 (0%)

You pay no personal income tax.

Example 2: You made  ₦2,000,000 profit in a year

• First ₦800,000 → 0% = ₦0
• Remaining ₦1,200,000 → 15% = ₦180,000

Total tax = ₦180,000

You are taxed at 15% on the portion above ₦ 800k, not on the full ₦ 2m.

Example 3: You made  ₦20,000,000 profit in a year

Here’s how it breaks down:

• First ₦800,000 → 0% = ₦0
• Next ₦2,200,000 → 15% = ₦330,000
• Next ₦9,000,000 → 18% = ₦1,620,000
• Remaining ₦8,000,000 → 21% = ₦1,680,000

Total tax = ₦3,630,000

Note that each portion is taxed differently, not the full ₦20m at a single rate.

Example 4: You made  ₦200,000,000 profit in a year

This is how it stacks up:

• First ₦800,000 → 0%
• Next ₦2,200,000 → 15%
• Next ₦9,000,000 → 18%
• Next ₦13,000,000 → 21%
• Next ₦25,000,000 → 23%
• Remaining ₦150,000,000 → 25%

Only amounts above ₦50m are taxed at 25%, not the entire ₦200m.

The Key Takeaway

As a business name, you are not taxed on income or inflow but on profit after valid expenses have been deducted 

You are never taxed at a flat percentage on your business profit .
You are taxed in layers, with lower portions taxed at lower or zero rates.

This is why:

• Accurate records matter
• Separayingg business and personal income matters
• And knowing your actual profit matters more than total inflow
  
  

When your numbers are precise, your tax is fair, predictable, and defensible.

Step 5: Keep Clear Records (This Is Non-Negotiable)

Nigeria operates a self-assessment tax system. That means:

• You declare your income and expenses.
• Tax authorities may audit or request clarification if figures don’t add up. 

Records you should keep include:

• Bank statements.
• Income and expense breakdowns.
• Invoices and receipts for rent, utilities, stock, salaries, transport, data, and other business costs

Clear descriptions of transactions make it easier to calculate profit and defend your filings.

Step 6: Know What You Can Deduct

The new law expands the allowable deductions.

For individuals, deductible expenses include:

• Pension contributions.
• NHIS and NHF contributions.
• Life insurance premiums.
• Mortgage interest.
• Rent (up to 20% of annual rent, capped at ₦500,000)

For registered business names:

• Rent, salaries, utilities, marketingg, transport, professional fees.
• Interest on business loans.
• Capital allowances for assets like generators, vehicles, or computers. 

Common Mistakes to Avoid

• Waitingg until 2026 to prepare.
• Paying taxes through random agents instead of the proper authorities.
• Assuming “small business” means “no tax responsibility.”
• Thinking zero tax means zero paperwork.

What does this new law mean for POS Agents?

If you run a POS business, it’s essential to know that under the new tax laws, POS agents are recognised as business owners, not just transaction facilitators. That means the rules apply to you as well.

First things first: a Tax ID is mandatory to run a POS or Moniepoint account. If you already have one, you can link it by reaching out to your Business Relationship Manager with your Tax ID.

When it comes to how you’re taxed, it depends on how your POS business is registered:

• If you are registered as a Business Name, you are subject to Personal Income Tax (PIT).
• If you are registered as a Limited Liability Company, you are subject to Company Income Tax (CIT).
  
  

As a POS agent, different taxes may apply, but not on the same basis. Here’s how it breaks down:

Business Name POS agents may deal with:

• Personal Income Tax (PIT)
• PAYE (if you pay yourself or staff salaries)
• VAT (only if your turnover exceeds ₦100 million)
• Withholding Tax (WHT), which counts as advance PIT
  
  

Limited Company POS operators may deal with:

• Company Income Tax (CIT) if turnover exceeds ₦50 million
• VAT (only if turnover exceeds ₦100 million)
• Withholding Tax (WHT), which counts as advance CIT
  

The key thing to remember is this: you are taxed on your profit, not your POS turnover. Keeping proper records and using a dedicated business account helps ensure your income is assessed accurately and fairly.

In summary, here’s how the new Tax Laws apply to you

1. Business Owners

If you run a registered business (Business Name or Limited Company):

• Your business must be registered with CAC.
• A Tax ID is mandatory.
• Tax is calculated on profit, not total inflow.
• You must keep clear records of income and expenses.
• Each business you own is taxed separately.
• You must also file your personal tax return as an individual.
  
  

Tax type depends on registration:

• Business Name is taxed under Personal Income Tax
• A Limited Company is taxed under Company Income Tax.

 POS Agents

If you run a POS business, you are treated as a business owner under the law.

• Tax ID is mandatory to run a POS or Moniepoint account.
• Your Tax ID must be linked to your Moniepoint account through your relationship manager.
• Tax is based on profit, not POS turnover.
  
  

Tax type depends on how you’re registered:

• Business Name is subject to Personal Income Tax, VAT (if turnover exceeds ₦100m), and Withholding Tax
• Limited Company is subject to Company Income Tax (if turnover exceeds ₦50m) , VAT (if turnover exceeds ₦100m), and Withholding Tax

Personal Users

If you are not running a business and earn income personally:

• You are taxed under Personal Income Tax.
• Tax uses progressive rates (you are not taxed one flat percentage).
• The first ₦800,000 of income is tax-free.
• There is additional rent relief capped at ₦500,000.
• You can reduce tax by claiming allowed deductions (pension, NHIS, rent, etc.).
• You must file your personal tax return.

Final Thoughts

One common fear business owners have is: “Won’t using a Moniepoint Business Account make me a target for tax?”
In reality, it does the opposite.

A business account protects you because it tells the whole story of your business. When your transactions are clearly labelled and separated, tax authorities can see what truly matters, your profit, not just the money that passed through your account.

For example, if ₦5 million flows into a personal account, there’s no visibility into the ₦4.5 million spent on stock, rent, or running costs. In that situation, tax authorities may rely on presumptive tax and assess tax on a large portion of the entire ₦5 million. That means you could be taxed far beyond your actual ₦500,000 profit.

With a Moniepoint Business Account, your records clearly show income, expenses, and fairer, simpler, safer profit-making assessments. Rather than putTax IDg a spotlight on you, proper documentation reduces risk, prevents inflated tax bills, and gives you confidence that you’re paying only what the law requires.

In the new tax era, compliance isn’t about exposure; it’s about clarity, protection, and peace of mind.