If you have been searching online about minimum tax in Nigeria, you have probably found a mix of old and new information. Some articles say 1%. Others say it has been abolished. A few mention 0.5% for companies.
All of those things are true, depending on which law you are looking at and whether you are an individual or a business.
This post clears up the confusion. It explains what the minimum tax rule was, what changed under the Nigeria Tax Act 2025, and whether it currently applies to you as a salary earner or a business owner.
Short answer for salary earners: the 1% individual minimum tax rule was abolished by the NTA 2025. If your chargeable income falls entirely within the zero-rate band, you pay zero. Nothing. There is no floor.
What Was the 1% Minimum Tax Rule?
A rule from the old PITA that caught lower earners in a frustrating trap.
Under the old Personal Income Tax Act (PITA), every individual was subject to a minimum tax provision. The rule was straightforward: if the tax calculated by applying the progressive bands to your chargeable income came out to less than 1% of your gross income, you still owed 1% of your gross income as a minimum.
In practice, this meant that someone earning a modest salary, after legitimate deductions pushed their chargeable income very low, could still end up owing a few thousand naira in tax even when the bands said they should owe nothing or next to nothing.
For example: an employee earning N720,000 per year with deductions of N172,800 (pension and NHF) had a chargeable income of N547,200. The bands would produce zero tax on that amount because it sat below the old exemption threshold. But the 1% minimum rule kicked in: 1% of N720,000 gross = N7,200 owed regardless.
It was a small amount. But it was the principle of it. You could do everything right, claim your deductions, fall below the threshold, and still get hit with a tax bill.
What Changed Under the NTA 2025?
The NTA 2025 abolished the individual minimum tax rule entirely. It does not exist anymore for salary earners or individual taxpayers.
In its place, the NTA 2025 introduced a proper zero-rate band: the first N800,000 of your annual chargeable income is taxed at 0%. This is not just a floor adjustment, it is a structural change. If your income falls entirely within the zero-rate band, you pay nothing, and there is no minimum to worry about.
Under the NTA 2025, if your annual chargeable income is N800,000 or less, you owe zero PAYE. No minimum tax. No floor. Zero.
This change benefits two groups in particular. First, low-income earners who were previously caught by the 1% floor even when their chargeable income was negligible. Second, employees whose deductions (pension, NHF, rent relief) bring their chargeable income close to or below N800,000.
Old Law vs New Law: Side by Side
| Old PITA (pre-2026) | NTA 2025 (from Jan 2026) | |
|---|---|---|
| Individual minimum tax rule | 1% of gross income if tax liability falls below this threshold | Abolished. No individual minimum tax under NTA 2025 |
| Company minimum tax | 0.5% of turnover for loss-making companies | Still applies. 0.5% of turnover for loss-making medium and large companies. Not applicable in first 4 years of operation. |
| Tax-free threshold (individual) | None for PAYE. Old CRA provided relief but no zero-rate band. | First N800,000 of chargeable income taxed at 0% |
| Minimum wage earner tax | Paid a small amount of tax even on modest incomes | Zero tax if annual chargeable income is N800,000 or less |
The most important row in that table is the company minimum tax row. That one did not go away. If you are a business owner, the 0.5% of turnover minimum tax still applies to your company if it makes a loss in any given year, with exceptions for small companies and new businesses in their first four years.
What the Change Means in Real Naira
Here is how removing the 1% floor changed the tax bill for earners whose chargeable income sits near or below the exemption threshold.
| Scenario | Old PITA Annual Tax | NTA 2025 Annual Tax |
|---|---|---|
| Gross N720,000 | Chargeable N547,200 | N7,200 (1% minimum applied) | N0 |
| Gross N900,000 | Chargeable N713,000 | N9,000 (1% minimum applied) | N0 |
| Gross N1,200,000 | Chargeable N800,000 | N12,000 (1% minimum applied) | N0 (exactly at zero-rate band) |
| Gross N1,800,000 | Chargeable N1,050,000 | N18,000 (1% minimum applied if bands produced less) | N37,500 (band calculation applies) |
The first three rows show earners who, under the old law, owed tax despite having chargeable incomes below the old threshold, because the 1% minimum applied. Under the NTA 2025, they owe nothing. The fourth row shows a case where the band calculation itself produces a tax figure, so the minimum tax was never the issue there.
What About the Company Minimum Tax?
This one stayed. Business owners need to understand how it works.
The company minimum tax of 0.5% of annual turnover was not abolished by the NTA 2025. It was retained but with some important conditions attached.
It only applies when a company is loss-making or has zero assessable profit in a given year. If a company makes a profit and pays normal CIT, the minimum tax does not come into the picture. It is a safety net that ensures the government collects something even when a company reports no taxable profit.
| Company Size | CIT Rate | Minimum Tax | When Does It Kick In? |
|---|---|---|---|
| Small (turnover up to N25m) | 0% | None | Small companies are fully exempt |
| Medium (N25m to N100m) | 15% | 0.5% of turnover | Only when the company makes a loss or zero profit |
| Large (above N100m) | 27.5% | 0.5% of turnover | Only when the company makes a loss or zero profit |
| New companies (any size, first 4 years) | Applicable rate | Exempt | Minimum tax waived entirely for first 4 years of operation |
Key exemptions from company minimum tax
- Small companies: Companies with annual turnover of N25 million or less and fixed assets not exceeding N250 million pay zero CIT under the NTA 2025. The minimum tax does not apply to them at all.
- New businesses in their first four years: Any company in the first four years of operation is exempt from the company minimum tax. Even if it makes a loss, no 0.5% is owed.
- Non-resident companies: The development levy does not apply to non-resident companies, though CIT and minimum tax rules still apply to their Nigeria-sourced income.
Common Questions
My payslip still shows a small tax even though I should be below the threshold. Why?
There are a few possible reasons. Your employer may not have updated their payroll system to use the NTA 2025 rules and may still be applying the old 1% minimum. Or the calculation of your chargeable income is slightly different from what you expect, because pensionable emoluments are calculated differently from your full gross. Check with your HR team and use the NairaSeed Tax Calculator to verify what your correct tax should be.
I am self-employed. Does the abolished minimum tax apply to me too?
Yes. The abolition of the individual minimum tax applies to all individuals, whether they are PAYE employees or self-employed persons filing direct assessments. If your chargeable income falls within the N800,000 zero-rate band, you owe zero personal income tax, with no minimum floor.
Does the 0.5% company minimum tax apply to my sole proprietorship?
No. A sole proprietorship is not a separate legal entity from its owner. The income is taxed as personal income under the individual tax bands, not as company income. The 0.5% company minimum tax applies to registered companies (limited liability companies), not sole traders or partnerships of individuals.
I run a limited company that made a loss this year. Do I owe the 0.5% minimum tax?
If your company is classified as medium or large (turnover above N25 million), and it is not within its first four years of operation, then yes, the 0.5% of turnover minimum tax applies for the loss-making year. If your company is small (turnover N25 million or less with fixed assets N250 million or less), it is fully exempt from CIT and from the minimum tax.
Confirm what you actually owe in 2026. The NairaSeed Tax Calculator uses the correct NTA 2025 rules with no minimum tax floor for individuals. Enter your salary and deductions and see your exact PAYE under the new law, including whether you owe anything at all.
>> Calculate your 2026 tax now
Related reading on NairaSeed:
- Nigerian PAYE Tax Calculator 2026: How Much Tax Will You Actually Pay?
- Nigeria’s New Tax Bands Explained: What Every Salary Earner Must Know in 2026
- NTA 2025 vs Old PITA: Are You Paying More or Less Tax in 2026?
- PAYE Tax in Nigeria: A Complete Guide for Employees and Employers (2026)
Disclaimer
This article is based on the Nigeria Tax Act 2025 as gazetted on 26 June 2025. Individual and company tax positions vary based on specific circumstances, structure, and state of residence. This article is for educational purposes only and does not constitute tax or financial advice. Consult a qualified tax professional for personalised guidance.
