New Income Tax Bill: Will Your Take-Home Pay Increase or Decrease?
Elijah TobsBy Elijah Tobs
Finance
May 25, 2026 • 3:43 PM
10m10 min read
Verified
Source: Unsplash
The Core Insight
The Presidential Committee on Fiscal Policy and Tax Reform (FPTR) has introduced a new Personal Income Tax Bill that fundamentally alters how Nigerians are taxed. By eliminating the Consolidated Relief Allowance (CRA) and restructuring tax brackets, the bill aims to provide relief to low-income earners while significantly increasing the tax burden on high-income individuals earning over N50 million annually.
As the founder and primary investigative voice at Kodawire, Elijah Tobs brings over 15 years of experience in dissecting complex geopolitical and financial systems. His work is centered on the ethical governance of emerging technologies, the shifting architectures of global finance, and the future of pedagogy in a digital-first world. A staunch advocate for high-fidelity journalism, he established Kodawire to be a sanctuary for deep-dive intelligence. Moving away from the ephemeral nature of modern headlines, Kodawire delivers permanent, verified insights that challenge the status quo and empower the global reader.
The Proposed Personal Income Tax Bill: A Complete Breakdown
What You Need to Know
The Shift: The government is moving away from the Consolidated Relief Allowance (CRA) model toward a simplified, multi-tiered graduated tax scale.
The Threshold: If you earn less than N1.45 million monthly, you are likely to see a reduction in your tax burden.
The High-Earner Impact: Those earning above N3 million monthly will face an effective tax rate exceeding 20%, a significant departure from the current ceiling.
Strategic Planning: Understanding the new statutory deductions and the specific 0% tax bracket for the first N800,000 is essential for your 2026 financial planning.
The Presidential Committee on Fiscal Policy and Tax Reform (FPTR) has introduced a proposal that could fundamentally alter how individual income is taxed. As a financial strategist, I have spent years observing how shifts in fiscal policy ripple through household budgets. This proposal is not merely a technical adjustment; it is a structural pivot designed to broaden the tax base while recalibrating the burden on high-income earners. If you are looking to build long-term stability, it is vital to understand how these changes impact your cash flow versus hoarding strategies.
In my professional view, the move to eliminate the Consolidated Relief Allowance (CRA), which previously allowed a deduction of 20% of gross income plus N200,000, is a bold attempt to simplify a system that has historically been opaque to the average taxpayer. However, simplicity often comes with trade-offs. While the lower-income brackets gain breathing room, the "super-rich" and upper-middle-class earners are being asked to shoulder a heavier load. For those aiming to scale their income, this shift makes it even more critical to focus on building real wealth through assets rather than just chasing a higher salary.
Why You Can Trust This
To provide this analysis, I have cross-referenced the proposed legislative text against current tax statutes. My process involved isolating the specific sections of the bill, notably Sections 28, 30, 56, and 58, to determine how they interact with existing payroll obligations. I have stripped away the political rhetoric to focus strictly on the mathematical impact on your take-home pay. My goal is to provide you with an objective, data-driven perspective that cuts through the noise of policy debate.
What is Changing? Key Sections of the New Bill
The proposed bill is structured to provide clarity where previous iterations were often subject to interpretation. By defining specific sections for deductions and chargeable income, the committee is attempting to standardize the tax experience across the country. For business owners, understanding these nuances is as important as mastering the 111 framework for scaling your business.
"The bill seeks to eliminate the Consolidated Relief Allowance (CRA) and introduce a 25% tax rate for individuals whose annual earnings exceed N50 million."
Section 28: This section serves as the new bedrock for eligible deductions. It defines exactly what you can subtract from your gross income to arrive at your taxable base.
Section 30: This provides the necessary legal framework to clarify what constitutes "chargeable income," removing ambiguity regarding which allowances are permissible.
Section 56: This is particularly relevant for sole proprietorships and individual business owners, as it outlines the tax rates applicable to these entities, ensuring they are not unfairly penalized compared to corporate structures.
Section 58: By referencing the Fourth Schedule, this section acts as the master key for individual tax rates, defining the new graduated tiers that will dictate your monthly PAYE deductions.
Reviewing the new tax bill requires careful calculation of your potential liabilities. (Credit: Mikhail Nilov via Pexels)
The Risks You Need to Know
The primary risk here is the loss of the CRA. For many, the CRA was a reliable buffer. Its removal means that your "taxable income" will likely rise unless you are diligent about utilizing the remaining statutory deductions. Furthermore, the 25% top-tier rate for those earning over N50 million annually introduces a new level of fiscal pressure on high-net-worth individuals. If you fall into this bracket, you must prepare for a higher effective tax rate than you have historically managed.
Old vs. New: How Your Tax Calculation Changes
Under the legacy system, the CRA was the primary tool for tax mitigation. By allowing a deduction of 20% of gross income plus N200,000, the system effectively shielded a portion of your earnings from the graduated scale. The new proposal retains statutory allowances, such as pension and life insurance contributions, but adds a specific rent allowance of N200,000 or 20% of your rent, whichever is lower.
Let’s look at the math. If you earn N6 million annually, the old system allowed for a significant reduction in your taxable base. Under the proposed system, the calculation is more direct, utilizing a 0% bracket for the first N800,000. While this sounds beneficial, the removal of the 20% CRA deduction means that for many, the tax payable remains relatively stable or increases, depending on your specific income level.
When we calculate the tax for a N6 million annual earner, the proposed system results in approximately N870,000 in annual tax. This is slightly lower than the current system's N896,000. However, the "math" changes drastically as you move up the income ladder. The graduated scale is designed to capture more revenue from those in the higher tiers, effectively neutralizing the benefit of the 0% initial bracket for high earners.
The New Graduated Tax Scale: A 6-Tiered Approach
The committee has proposed a 6-tiered structure that aims to be more progressive than the current PAYE system. The tiers are as follows:
0% on the first N800,000
15% on the next N2.2 million
18% on the next N9 million
21% on the next N13 million
23% on the next N25 million
25% on the next N50 million
The Other Side of the Story
Many argue that this new scale is "fairer" because it taxes the wealthy at a higher rate. However, I contend that this approach ignores the inflationary pressures on the middle class. By setting the top tier at 25% for earnings over N50 million, the government risks disincentivizing high-level productivity. We must ask ourselves: at what point does a progressive tax system become a barrier to professional growth?
Winners and Losers: Who Pays More?
The "break-even" point for this new system appears to be around N1.45 million in monthly earnings. If you earn less than this, you are generally a "winner" under the new proposal, as your tax burden will likely decrease. For example, a minimum wage earner (N70,000 monthly) will see their tax drop from N3,326 to just N500.
Conversely, the "losers", or rather, those facing a higher tax burden, are those earning above the N1.45 million threshold. For the "super-rich" earning over N50 million annually, the effective tax rate will climb above 20%, a threshold that was previously unheard of under the current system.
Professional tax planning is becoming essential for high-income earners. (Credit: DS stories via Pexels)
The Silent Wealth Killer
The biggest trap here is "bracket creep." As your salary increases to keep pace with inflation, you will move into higher tax tiers faster than you might expect. Because the new system is more aggressive at the top end, your salary raises could be partially eroded by the 23% or 25% tax brackets. Always calculate your *net* increase after tax, not just your gross salary bump.
Strategic Implications for Your Personal Finances
To navigate these changes, you must become an expert in your own deductions. Since the CRA is gone, your focus should shift to maximizing every available statutory deduction. Ensure your pension contributions, National Housing Fund payments, and life insurance premiums are fully documented and correctly applied to your payroll. For more on managing your resources, see my guide on simple money habits that could save you thousands.
Below N1.45M monthly: You are likely to see a tax decrease. Focus on maintaining your current savings rate.
Above N1.45M monthly: You will likely pay more. Review your tax planning strategy immediately.
Above N4.4M monthly (N50M+ annually): You are in the top tier. Consult with a tax professional to ensure you are utilizing all legal deductions to manage your effective tax rate.
Tools I Actually Use
Payroll Calculators: Use verified, updated tax calculators that reflect the latest proposed schedules to forecast your monthly take-home.
Expense Trackers: Apps that categorize your statutory contributions help you keep a clear record for tax filing season.
Professional Tax Software: For high-income earners, investing in software that tracks effective tax rates is no longer optional, it is a necessity.
What Do You Think?
The proposed tax bill represents a significant shift in our fiscal landscape, balancing the need for revenue with the realities of household income. I am curious to hear your perspective: Do you believe the move to a 25% top-tier rate is a necessary step for national development, or does it place an undue burden on the country's highest earners? I will be replying to every comment in the first 24 hours.
