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Do I pay tax on my small business in Nigeria? The 2026 rules in plain words

If your business sells ₦50 million or less in a year, it does not have to charge VAT, and a registered company of that size pays no company income tax. If the business is in your own name, you pay personal income tax on its profit, and the first ₦800,000 of profit a year is tax free. Either way, you still file a yearly return, even when no tax is due.

Step by step

  1. Know which kind of business you are

    Look at your CAC papers. If your number starts with RC, your business is a company, and the company pays company income tax. If it starts with BN, or you never registered, the business is in your own name, and you pay personal income tax on its profit. The steps below cover both.

  2. Add up a year of sales

    Add every sale for the year, from 1 January to 31 December, before taking away any cost. This is your turnover. The law draws its main line at ₦50 million. If your sales so far this year are about ₦4 million a month or less, you are under it.

  3. A company under ₦50 million: no company income tax

    A company with sales of ₦50 million or less, and equipment and property worth ₦250 million or less, is a small company. It pays no company income tax and no development levy (Nigeria Tax Act 2025, sections 56, 59 and 202). It also signs its own accounts in place of an audit. One exception: a business selling professional services, such as a law or accounting firm, never counts as small.

  4. Under ₦50 million: you do not have to charge VAT

    VAT is 7.5%. A small business does not have to register for VAT, add it to prices or file monthly VAT returns, unless it chooses to (Nigeria Tax Administration Act 2025, section 22). If you are above the line, VAT returns are due by the 21st of every month.

  5. A business in your own name: tax on the profit, not on the sales

    Work out your profit for the year: sales, minus what the goods cost you, minus your running costs (our profit guide shows how). If you pay rent on your home, take away 20% of that rent, up to ₦500,000. On what is left, the first ₦800,000 is tax free. The next ₦2.2 million is taxed at 15%, and higher slices at 18% to 25% (Nigeria Tax Act 2025, Fourth Schedule).

  6. File your yearly return, even if no tax is due

    Every taxable person needs a Tax ID and must file a yearly return. For a business in your own name, the date is set by your state tax office: in Lagos it is 31 March. A company files within six months after its year ends. Filing late costs ₦100,000, then ₦50,000 for every month after (Nigeria Tax Administration Act 2025, sections 4, 11, 13 and 101).

  7. Keep your records for six years

    The tax office can ask how you got your figures, so keep your sales, costs and receipts for six years (section 31). Records also protect you: without them, the tax office can estimate what you owe. If you pay staff and take tax from their pay, pay it over by the 21st of the next month.

    Checked against the text of the Nigeria Tax Act 2025 and the Nigeria Tax Administration Act 2025 on 23 October 2026. This is general information, not tax advice: for your own case, ask a tax adviser or your state tax office.

An example: a provisions shop in the owner’s own name

Chinedu’s shop is registered as a business name (BN). It sold ₦14 million last year, so it is well under ₦50 million and charges no VAT. Here is the tax on its profit:

  • Profit for the year (sales, minus goods and running costs)₦2,400,000
  • Rent relief: 20% of ₦600,000 rent on the home− ₦120,000

Profit that is taxed₦2,280,000

The first ₦800,000 is tax free, which leaves ₦1,480,000. At 15%, the tax for the year is ₦222,000, about ₦18,500 a month. The return is due by 31 March in Lagos.

Do this today: Add up your sales for this year so far and work out whether you are under ₦50 million. Then write down the date your yearly return is due.

Questions owners ask

Do small businesses pay tax in Nigeria in 2026?

A registered company with sales of ₦50 million or less a year, and fixed assets of ₦250 million or less, pays no company income tax. A business in your own name pays personal income tax on its profit, and the first ₦800,000 a year is tax free. Both must still file a yearly return.

Do I need to charge VAT on my small business?

Not if your sales are ₦50 million or less a year. A small business does not have to register for VAT, charge it or file VAT returns, unless it chooses to. VAT is 7.5%.

What happens if I file my tax return late?

Filing late costs ₦100,000, then ₦50,000 for every month after, under the Nigeria Tax Administration Act 2025. This applies even when no tax is due.

Is the small company limit ₦50 million or ₦100 million?

The Nigeria Tax Act 2025, section 202, sets it at ₦50 million in yearly sales, with fixed assets of ₦250 million or less. Some articles say ₦100 million; the Act’s own text says ₦50 million.

Clara can do all of this for you

Clara keeps your sales and costs as you go, so your yearly figures are ready when you file. Ask "When is my tax due?" and she tells you what to file and by when, with your tax summary one tap away.

When is my tax due?

ClaraYour yearly return is due by 31 March, even if no tax is due. Late filing: ₦100,000, then ₦50,000 a month.

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