FAQ - ClarTax Nigeria

ClarTax Nigeria is a free educational platform that helps Nigerians understand the tax system. We provide simple explanations, accurate calculators, and reliable information about PAYE, VAT, business taxes, and other tax obligations. We're not affiliated with NRS (Nigeria Revenue Service) or any government agency — we're an independent resource built to make tax information accessible to everyone.

No! All our calculators and educational resources are completely free and accessible without creating an account. You can use them as many times as you want without signing up or providing any personal information.

No, we are not affiliated with the Nigeria Revenue Service (NRS, formerly FIRS) or any government agency. We are an independent educational platform. All our information is sourced from official NRS publications and Nigerian tax laws, but we are not a government entity.

Our PAYE calculator uses the official 2026 tax bands and formulas published by NRS. It calculates your tax based on current Nigerian tax law, including the new ₦800,000 tax-free threshold, rent relief, and pension deductions.

However, individual circumstances may vary (bonuses, special allowances, etc.), so we recommend using our calculator as a guide and consulting your HR department or a tax professional for your specific situation.

CRA was abolished under the Nigeria Tax Act 2025, which took effect on January 1, 2026. It has been replaced by a simpler system: a flat ₦800,000 tax-free threshold per year.

This means the first ₦800,000 you earn annually (about ₦66,667 monthly) is completely tax-free — no complex formulas needed. This change simplifies tax calculations and benefits lower-income earners.

Rent Relief is a NEW tax deduction introduced in 2026. If you pay rent, you can deduct 20% of your annual rent from your taxable income, subject to these limits:

Maximum deduction: ₦500,000 per year
Cannot exceed 20% of your gross annual income
Requires proof of rent payment (receipts, bank statements, tenancy agreement)

Example: If you pay ₦1,200,000 annual rent, your rent relief would be ₦240,000 (20% of ₦1.2M), which reduces your taxable income.

Nigeria now has 6 tax bands (simplified from 7 in previous years):

First ₦800,000: 0% (tax-free)
₦800,001 - ₦3,000,000: 15%
₦3,000,001 - ₦12,000,000: 18%
₦12,000,001 - ₦25,000,000: 21%
₦25,000,001 - ₦50,000,000: 23%
Above ₦50,000,000: 25%

Tax is calculated progressively — you only pay the stated rate on income within each band.

There could be several reasons:

Your employer may be using different allowance calculations
You might have additional deductions (NHF, life insurance, rent relief, etc.)
Bonuses or irregular income may affect monthly calculations
Your employer might be applying a different interpretation of tax law
Your employer may still be using old 2025 tax rates (ensure they've updated to 2026 rates)

If there's a significant difference, we recommend requesting a detailed breakdown from your HR/payroll department.

If PAYE is your only source of income and your employer remits it properly to NRS, you typically don't need to file annual returns.

However, if you have additional income (rental income, business income, investment income), you must file annual tax returns by March 31st of the following year.

The Development Levy is a NEW 4% tax introduced in 2026 for large businesses. It applies to companies with annual turnover of ₦50 million or more.

What it replaces:

Tertiary Education Tax (TET) - 2.5%
NITDA Levy - 1%
NASENI Levy - 1%

Instead of paying three separate levies totaling 4.5%, businesses now pay one consolidated 4% Development Levy. This simplifies compliance and reduces the total tax burden by 0.5%.

In 2026, the small business tax exemption threshold was DOUBLED from ₦25 million to ₦50 million. This means:

Small businesses (turnover below ₦50M): Pay 0% Company Income Tax
Large businesses (turnover ₦50M and above): Pay 30% CIT + 4% Development Levy

The medium category (20% rate) was removed, creating a simpler two-tier system. This change significantly benefits growing businesses.

You should register for tax as soon as you start generating income from your business, regardless of the amount.

For VAT registration: Required when your annual turnover exceeds ₦25 million.

For Company Income Tax: All registered companies must file, but small companies (turnover below ₦50M) pay 0% tax.

Business Name (Enterprise): You pay personal income tax on profits. Tax rates range from 0% to 25% based on the 2026 income bands.

Limited Liability Company: The company pays Company Income Tax (CIT) at 0% or 30% depending on turnover, separate from your personal income. Companies with ₦50M+ turnover also pay 4% Development Levy.

Most small businesses start as business names and transition to companies as they grow.

No, you're not required to register for VAT or charge VAT if your annual turnover is below ₦25 million. You can operate without adding 7.5% VAT to your prices.

However, once you cross ₦25M in annual turnover, you must register for VAT within 6 months and start charging it on your invoices.

Yes, but only if you're VAT-registered. When you file your monthly VAT returns, you can deduct the VAT you paid on business purchases (input VAT) from the VAT you collected from customers (output VAT).

If you're not VAT-registered, you cannot claim back VAT paid on purchases.

No. All calculations happen in your browser. We don't store or transmit any financial data you enter into our calculators. Your privacy is important to us, and our calculators are designed to work entirely on your device without sending information to our servers.

We monitor NRS announcements, Finance Act updates, and CBN circulars regularly. When tax rates, bands, or regulations change, we update our calculators and content within 48 hours. We also publish blog posts about significant tax policy changes to keep you informed. Our platform was fully updated for the Nigeria Tax Act 2025 changes that took effect January 1, 2026.

No, ClarTax is an educational and calculation tool. We don't file taxes on your behalf or connect to NRS systems.

To file taxes, you need to use the official NRS TaxPro-Max portal or work with a registered tax consultant. We can help you understand what you owe, but filing must be done through official channels.

You can reach us through our contact page. We typically respond within 24-48 hours. Please note that we provide general tax education, not personalized tax advice. For specific tax situations, we recommend consulting a certified tax professional.

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