The Federal Government’s 2025 tax reforms represent one of the most far-reaching overhauls of Nigeria’s tax framework in decades. With implementation set for 1 January 2026, HR and payroll teams must begin preparing for the full impact of these changes on employee taxation, payroll processing, benefits, vendor management, and workforce planning.

This guide provides a detailed HR compliance checklist for 2026, outlining what organisations must do to ensure full alignment with the Federal Government’s new tax reforms.

Overview of the Federal Government Tax Reforms

The Nigeria tax reforms 2025 introduced four major legislations aimed at simplifying compliance, strengthening enforcement, digitising tax administration, and modernising Nigeria’s revenue system. These include:

• Nigeria Tax Act (NTA)
• Tax Administration Act (TAA)
• Nigeria Revenue Service Act (NRSA)
• Joint Tax Board Act (JTBA)

Key Tax Changes Affecting HR and Payroll in 2026

1.Updated Personal Income Tax Thresholds and Reliefs

Under the reforms:

• Individuals with annual taxable income of ₦800,000 or below are now exempt from Personal Income Tax (PIT).
• A new Rent Relief allows individuals to claim 20% of their annual rent paid, capped at ₦500,000 (subject to declaration and tax authority clearance).
• Compensation for loss of employment is tax-exempt up to ₦50 million.

HR Implications:

• Review employee tax profiles for correct assessments.
• Update payroll formulae for new reliefs and exemptions.
• Communicate net pay changes to employees to avoid confusion in January.

2. Changes to Company Taxes Affecting Workforce Planning

According to PWC, small businesses (turnover < ₦100 million and assets < ₦250 million) are now exempt from:

• Company Income Tax (CIT)
• Capital Gains Tax (CGT)
• The new 4% Development Levy

Larger companies, however, face:

• CGT increase from 10% to 30%
• Mandatory payment of the 4% Development Levy
• A minimum effective tax rate of 15% for companies with ₦50 billion turnover or those in multinational groups with €750 million aggregate global revenue
  

HR Implications:

• Adjust compensation planning, especially profit-linked rewards.
• Reassess share-based compensation, ESOPs, and equity arrangements.
• Factor new levy costs into salary and benefits budgeting for 2026.

3. Capital Gains Tax on Indirect Transfers of Shares

CGT now applies where Nigerian company shares are transferred indirectly through offshore holding structures. The exemption threshold has increased to ₦150 million within 12 months, where gains are below ₦10 million.

HR Implications:

• Update equity grant and share disposal policies.
• Review exit and liquidity event structures for employees at leadership or shareholder level.

4. Zero-Rated VAT for Essential Goods and Services

While VAT remains 7.5%, essential items such as food, healthcare, education, and residential rent are zero-rated.

HR Implications:

• Reassess welfare and staff support programmes.
• Consider VAT-exempt categories when designing employee benefits for cost efficiency.

5. Stricter Penalties for Non-Compliance

Penalties have increased substantially:

• ₦100,000 for late filing (first month)
  
• ₦50,000 for each subsequent month
  
• ₦5 million penalty for awarding contracts to vendors not registered for tax
  

HR Implications:

• Strengthen vendor compliance checks for contractors, consultants, and outsourced labour.
• Maintain complete, up-to-date employee tax records and documentation.
• Train HR teams on new regulatory requirements.

HR Compliance Checklist for 2026

1. Update All Payroll Calculations

• New income thresholds
• New CGT applications
• VAT impacts on benefits

2. Review Workforce Costs for 2026

• Model the impact of the Development Levy
• Adjust profit-based rewards or executive compensation
• Update benefits to reflect zero-rated VAT categories

3. Strengthen Documentation & Record-Keeping

• Accurate employee KYC
• Tax ID validation
• Contractual agreements for external workers

4. Audit Vendor Compliance

• Only engage vendors registered for tax
• Review contractor documentation
• Update procurement compliance workflows

5. Update Internal Policies

• Compensation policies
• ESOP and equity plans
• Redundancy, severance, and employee exit processes

6. Train HR & Payroll Teams

• Digital reporting obligations
• Update compliance processes

Conclusion

The Federal Government tax reforms will fundamentally reshape how organisations manage payroll, taxation, and employee benefits in 2026. HR teams must act early to implement system updates, adjust workforce strategies, and strengthen internal compliance controls.

SeamlessHR has already updated its payroll management system to reflect all 2025 reforms. Organisations simply need to toggle on the new tax setting on the SeamlessHR Payroll platform when the changes take effect in January 2026.

This ensures you remain compliant from day one, without manual calculations or risk of error.