Share this article
Table of Contents (2026 tax laws)
Understanding the four pillars of tax reform
Are you affected? Understanding tax residency
The good news: Generous tax relief for lower earners
Progressive tax rates explained
Powerful deductions for freelancers and small businesses
Example of how you will be taxed from 2026
Your five-step compliance roadmap
7 common compliance mistakes to avoid
Frequently Asked Questions (FAQs)
Introduction
If you’re a Nigerian freelancer, remote worker, or digital entrepreneur, January 1, 2026, marks a new chapter in taxation. The Nigeria Tax Act (NTA) 2025 introduces the most comprehensive tax reform in decades, bringing digital workers into the formal tax system.
Earning through Upwork, working remotely for a foreign company, or running an online business? These changes directly impact you. At Cleva, we’re committed to helping you navigate these changes smoothly. This guide explains everything you need to stay compliant and avoid penalties.
Understanding the four pillars of tax reform
The new framework is built on four interconnected laws that create a unified and efficient tax system.
1. The Nigeria Tax Act (NTA)
This is the primary legislative framework governing taxation in the country.
Remember when you had to worry about multiple laws that sometimes contradicted each other? Those days are over. The NTA merges over 50 different tax laws into one comprehensive code.
Instead of wondering “Which law applies to my Upwork income?”, you now have one clear set of rules. No more ambiguity about whether your freelance work falls under one law or another.
2. The Tax Administration Act
Previously, registering in Lagos might be completely different from Rivers State. This act changes this by creating one standard process across all of Nigeria.
Whether you’re in Abuja, Port Harcourt, or Kano, the registration steps, filing deadlines, and payment procedures are now the same. No more confusion when you relocate within Nigeria or work across states.
3. The Nigeria Revenue Service (NRS) Act
The Federal Inland Revenue Service (FIRS) has been replaced by the Nigeria Revenue Service (NRS), a more independent, technologically advanced body designed for the digital economy.
The NRS can track payments across platforms like Payoneer and Wise, link your BVN to all your accounts, and automatically detect income patterns. They’re not just collecting taxes; they’re using technology to see the full picture of digital work.
4. The Joint Revenue Board Act
Ever had a dispute with a government agency and felt like you had nowhere to turn? This act creates formal channels for resolving tax disagreements, including a dedicated Tax Appeal Tribunal and Ombudsman.
If you believe you’ve been wrongly assessed or overtaxed, you now have an official process to challenge it, not just endless back-and-forth with officials.
Are you affected? Understanding tax residency
Important note for 9-5 workers:
If you work a traditional job where your employer deducts tax from your salary through PAYE (Pay As You Earn), most of what’s in this article doesn’t apply to you. Your employer handles your tax obligations. This guide is specifically for freelancers, remote workers, and anyone earning income outside traditional employment where no one is deducting tax on your behalf.
Now, back to freelancers and remote workers. You’re considered a Nigerian tax resident, and therefore subject to these new laws, if you meet ANY of these criteria:
- Domiciled in Nigeria with a permanent residence
- Have substantial economic and family ties within Nigeria
- Physically present in Nigeria for 183 days or more in a 12-month period
If you fall into any of these categories and earn income, it is advised that you register and obtain a Tax Identification Number (TIN) before January 1, 2026.
Who exactly must comply?
The reform targets digital workers across these categories:
- Platform freelancers (Upwork, Fiverr, Toptal)
- Remote employees working for foreign companies from Nigeria
- Online business owners using Cleva, Payoneer, Wise
- Students with side gigs (tutoring, coding, content creation, design)
- Digital service providers (developers, designers, writers, marketers)
The principle is simple: earning money for services rendered in Nigeria, regardless of client location, means you must register and comply.
The good news: Generous tax relief for lower earners
The new system introduces significant relief measures, particularly for those just starting out or earning modest incomes.
Zero-Tax Band: Your First ₦800,000 is Tax-Free
The most significant benefit is the zero-tax band. The first ₦800,000 (approximately $535) of your annual income is completely tax-free. This means if you earn ₦66,667 or less monthly, you owe nothing, though you still must register and file returns.
Progressive tax rates explained
Beyond the zero-tax threshold, Nigeria now uses a progressive system where you pay different rates on different portions of your income:
| Income Band | Rate |
| First ₦800,000 | 0% |
| Next ₦2.2 million | 15% |
| Next ₦9 million | 18% |
| Next ₦13 million | 21% |
| Next ₦25 million | 23% |
| Above ₦50 million | 25% |
Powerful deductions for freelancers and small businesses
As a freelancer or small business owner (defined as having annual turnover of ₦50 million or less), you have access to significant benefits:
Small business exemptions
If your freelancing business earns ₦50 million or less annually, you benefit from:
- 0% Companies Income Tax (CIT) – a major relief for small operations
- VAT Exemption – no need to charge VAT or file monthly VAT returns
Expense deductions: Your secret weapon
Unlike traditional employees with limited deductions, freelancers can deduct ANY expense directly related to their work, provided you can prove its business purpose. Common deductible expenses include:
- Internet and data costs – your monthly subscriptions and data bundles
- Electricity bills – the portion used for work (especially important given Nigeria’s power challenges)
- Software and tools – Canva Pro, Adobe Creative Cloud, Grammarly, project management tools
- Equipment – laptops, cameras, microphones, external monitors
- Professional development – online courses, certifications, workshops
- Content creator specific – even clothing and makeup used specifically for work content
Additional deductions
You can also deduct rent relief (20% of annual rent up to ₦500,000), pension contributions, National Housing Fund, and National Health Insurance.
Withholding tax credits
If a client or employer deducted Withholding Tax (WHT) before paying you, they should have remitted it to the government. When filing your annual returns, claim this WHT as a credit to offset your final liability and prevent double taxation.
Here’s an example of how your tax will be from January 1st, 2026
Meet Chioma, a Freelance Graphic Designer
Let’s assume that Chioma earned ₦5 million from her freelance design work in 2026. Here’s how her tax will be calculated:
- First ₦800,000 = ₦0 (0% tax)
- Next ₦2.2 million = ₦330,000 (15% tax)
- Remaining ₦2 million = ₦360,000 (18% tax)
Total tax liability for 2026: ₦690,000
But wait, Chioma kept good records of her business expenses in 2026:
- Internet/data: ₦240,000
- New laptop: ₦450,000
- Adobe Creative Cloud: ₦180,000
- Rent relief (20% of ₦1.5M annual rent): ₦300,000
- Total deductions: ₦1,170,000
Chioma’s taxable income: ₦5,000,000 – ₦1,170,000 = ₦3,830,000
Recalculated tax:
- First ₦800,000 = ₦0 (0%)
- Next ₦2.2 million = ₦330,000 (15%)
- Remaining ₦830,000 = ₦149,400 (18%)
- New tax liability for 2026: ₦479,400
Chioma saved ₦210,600 simply by tracking and claiming legitimate business expenses!
Your five-step compliance roadmap
Here’s exactly what you need to do to stay compliant:
Step 1: Register and get your TIN (Before January 1, 2026)
Register with your state tax authority (not federal). You’ll receive a Tax Identification Number (TIN), which is now mandatory for:
- Any government contracts
- Opening new bank accounts
- Registering businesses
- Various official transactions
Penalty for non-registration: ₦50,000 fine for the first month, ₦25,000 for each subsequent month.
Note: While the new tax reform allows the use of your National Identification Number (NIN) as a TIN in some cases, we strongly advise registering for a dedicated TIN through your state tax authority. A proper TIN ensures smoother processing, clearer separation between your personal identity and tax records, and reduces potential complications during tax filings and audits.
Step 2: Track all income meticulously
Starting now, maintain detailed records of:
- Every payment received from freelancing platforms
- Direct client payments
- Foreign income from any source
- Payment dates and amounts
- Transaction histories from Cleva, Payoneer, Wise etc.
- The CBN exchange rates used for currency conversions
Use an accounting software or even a simple spreadsheet to log every transaction as it happens. With Cleva’s account statement feature, you can easily track all your inflows and outflows in one place, no more scrambling through multiple platforms when filing season arrives.
Step 3: Convert foreign income to naira
All foreign earnings must be declared in naira using the official Central Bank of Nigeria (CBN) exchange rate on the date of receipt. Your liability is calculated on this naira equivalent, not the dollar amount.
This is crucial because the rate you use matters significantly for your tax calculation.
Tunde works for a US company and receives monthly payments of $2,000 to his Cleva account. When the official CBN rate is ₦1,470/$1, he declares ₦2,940,000, even if the parallel market offered better rates like ₦1,600/$1.
Tunde must use the official CBN rate on the date he received the payment, not the rate when he withdrew it using Cleva, and definitely not the parallel market rate. He should:
- Check the CBN website for the official rate on receipt date
- Document this rate in his records
- Calculate and record the naira equivalent immediately
- Keep transaction confirmations showing payment dates
Annual calculation for Tunde:
- 12 months × $2,000 = $24,000 received
- Using average CBN rate of ₦1,480/$1
- Total annual income to declare: ₦35,520,000
Even though Tunde might have gotten better rates through parallel markets, he must use official CBN rates for tax purposes.
Step 4: File self-assessment returns annually
Unlike traditional employees whose employers handle taxes, freelancers must file self-assessment returns. Your return should include:
- Total gross income (all sources)
- All business expenses and deductions
- Reliefs you qualify for
- Calculated tax liability
- Any WHT credits to offset your liability
Critical requirement: Even if your income falls below ₦800,000 and you owe nothing, you must still file annual returns.
Penalty for non-filing: ₦100,000 fine for the first month, ₦50,000 for subsequent months.
Step 5: Pay your tax liability
After deductions and reliefs, if you owe payment, remit payment to your state tax authority using the provided payment channels. Keep all payment receipts and confirmation documents.
Common compliance mistakes to avoid
- Waiting until the deadline: Register now to avoid last-minute technical issues.
- Not tracking small expenses: That ₦2,000 weekly data bundle adds up significantly.
- Mixing personal and business expenses: Keep separate accounts or document business transactions meticulously.
- Ignoring filing requirements under ₦800,000: You must file even if you owe no tax.
- Using parallel market rates: Always use official CBN rates for foreign income conversion.
- Not keeping receipts: No documentation means no deductions.
- Not labeling transactions properly: This is crucial and often overlooked. When sending money from your naira account, always use the description box to specify what the transaction is for. If someone sends you a gift, write “Gift from [name]”. Without proper labeling, the tax authority may classify all incoming funds as taxable income, and you’ll have a difficult time proving otherwise. Make it a habit to label every transaction. It takes 5 seconds but could save you thousands in unnecessary taxes.
Frequently Asked Questions
Q: I earn just ₦500,000 annually. Do I need to register?
Yes. Registration and filing are mandatory for all earners, even if you owe nothing.
Q: What if I have multiple income streams?
Combine all income when calculating tax liability. Progressive rates apply to total annual income.
Q: Can I register after December 31, 2025?
Yes, but you might face penalties from January 2026. Register before the deadline to avoid fines.
Q: My clients are all outside Nigeria. Do I still pay tax?
Yes, if you’re a Nigerian tax resident working from Nigeria, your income is subject to this regardless of client location.
Q: I receive payments in USD. How do I manage this for tax purposes?
You need to convert USD earnings to naira using official CBN rates on the date of receipt. Having a USD account (like Cleva’s) helps you track foreign payments clearly and maintain proper records of when funds were received, essential for accurate reporting.
Q: Will Cleva automatically deduct tax from my Cleva account?
No, Cleva will not deduct tax from your account. Cleva is a financial service provider, not a tax collection agency. As a freelancer or remote worker, you are responsible for calculating and paying your own taxes directly to the Nigeria Revenue Service (NRS). Cleva provides you with detailed account statements and transaction histories to help you track your income accurately for filing purposes, but the actual tax payment and compliance are your responsibility.
Q: What’s the best way to receive international payments as a freelancer?
Use reliable platforms like Cleva that provide clear transaction histories and statements. With proper USD account infrastructure, you can easily track receipt dates and amounts, making it simpler to convert to naira at official CBN rates for your filing.
Taking action today
The time to prepare is now. Here’s your immediate action plan:
- Research your state tax authority’s registration process
- Gather required documents (BVN, valid ID, proof of address)
- Set up a system for tracking income and expenses
- Complete your TIN registration
- Open a dedicated business bank account if possible
- Start maintaining detailed financial records
Nigeria’s Tax Reform 2025 fundamentally changes how digital workers are taxed. It brings new obligations but also offers substantial relief for lower earners and legitimate deductions that can significantly reduce your tax burden.
Success requires proactive compliance: register early, track everything meticulously, claim all available deductions, and file on time. Penalties for non-compliance are steep, but compliance is straightforward when you start now.
How Cleva can help
At Cleva, we provide USD accounts for Africans, making it easier for freelancers and remote workers to receive international payments and manage foreign income. As you navigate these new tax requirements, here’s how we support you:
- Receive USD payments seamlessly from international clients and platforms
- Track your foreign income clearly with detailed account statements showing all inflows and outflows
- Maintain organized financial records that make tax filing straightforward and stress-free
- Manage multiple currencies in one place without the complexity
The tax landscape is changing, but with the right financial infrastructure, you can turn compliance from a burden into a routine part of your freelance success.
Ready to simplify how you receive and manage international payments? Download the Cleva app at and get your USD account for free to stay organized and tax-ready.
Important: This guide provides general information based on the Nigeria Tax Act 2025. Consult with a qualified tax consultant or chartered accountant for personalized advice before making tax-related decisions. Verify all information with the Nigeria Revenue Service (NRS) or your state tax authority.
