FG Clarifies Personal Income Tax Exemption for Low-Income Earners Under New 2026 Tax Framework

FG Clarifies Personal Income Tax Exemption for Low-Income Earners Under New 2026 Tax Framework

The Federal Government (FG) has clarified that low-income earners remain exempt from personal income tax (PIT) under the new tax framework that took effect on January 1, 2026, following widespread criticism and misinformation.

In a statement issued on Thursday, Tanimu Yakubu, Director-General of the Budget Office of the Federation, explained that the N800,000 annual tax-free threshold is the cornerstone of the revised tax structure. Under the new system, the first N800,000 of annual income attracts a zero per cent tax rate, a provision deliberately overlooked by critics who claimed the reforms would tax the poor.

Using a hypothetical example, Yakubu noted that a worker earning N75,000 per month would have an annual income of N900,000, meaning only N100,000 is taxable. After accounting for pension contributions and deductible health insurance, the taxable amount could fall below the threshold, resulting in zero tax liability.

READ ALSO:

• Venezuela Begins Releasing Political Prisoners in Gesture of Peace After U.S. Seizure of Maduro
• Concerned Petrol Station Workers Oppose AA Rano’s Automated Fuel Stations Over Job Risks
• CBN Forecasts ₦950 Petrol Price in 2026 Amid FX Stability, Lower Oil Prices

“Temporary deductions are not taxes; they directly benefit workers and reduce taxable income, demonstrating protection rather than exploitation,” Yakubu stated, urging the public to distinguish deductions from levies.

The DG also criticised the misuse of global poverty benchmarks, such as the World Bank’s $4.20-per-day poverty line, warning that converting it to naira without considering purchasing power parity distorts its intent.

Yakubu further emphasised that widening the tax base does not automatically mean taxing low-income earners. Instead, it can involve improving compliance among high earners, capturing participants in the informal economy, and closing loopholes.

Responding to claims that the reforms were politically motivated, Yakubu dismissed the argument as misrepresentation and selective accounting, noting that pension and health insurance contributions are not taxes but deferred earnings and insurance payments.

He concluded that the new personal income tax structure explicitly protects low-income earners, and claims to the contrary were driven more by narrative framing than actual law. The government reaffirmed that the reforms aim to strengthen revenue collection, reduce dependency on borrowing, and maintain fairness in the taxation system.

FG Clarifies Personal Income Tax Exemption for Low-Income Earners Under New 2026 Tax Framework