Self-Employed Tax in Nigeria: How to Calculate and File Returns

Complete guide to self-employed tax under the NTA 2025. Covers business income computation, allowable expenses, tax bands, filing deadlines, and instalment payments.

If you work for yourself — whether as a sole proprietor, freelance consultant, independent contractor, trader, artisan, or professional in private practice — there is no employer to deduct PAYE from your income. The entire burden falls on you: computing your own tax, paying it in instalments during the year, filing your annual return by 31 March, and keeping records that survive scrutiny.

The Nigeria Tax Act 2025 applies the same progressive tax bands to self-employed income as it does to salaried employment, but the computation is different, the deductions are different, and the filing obligations are entirely your responsibility.

This guide walks you through every step, from working out your taxable profit to submitting your return to the State Internal Revenue Service.

Who Counts as Self-Employed for Tax Purposes?

You are self-employed if you earn income from a trade, business, profession, or vocation that you control — rather than receiving a salary under a contract of employment. The NTA 2025 does not use the phrase “self-employed” directly, but it taxes income from business or professional activities under the personal income tax provisions when the taxpayer is an individual (not a company).

Common examples include freelance writers, software developers, graphic designers, photographers, consultants, lawyers and accountants in sole practice, doctors running private clinics, traders and market sellers, mechanics, tailors, caterers, real estate agents, content creators, ride-hailing drivers, and anyone running a one-person business that is not registered as a limited liability company.

If you registered a limited liability company, your business pays corporate income tax under the CIT provisions of the NTA 2025 — not personal income tax. If you operate as a sole proprietor (whether registered with the CAC as a business name or not), your business income is your personal income, and this guide applies to you.

Step 1: Determine Your Gross Business Income

Your gross business income is the total revenue you earned from your trade, business, or profession during the calendar year — 1 January to 31 December. This includes:

• All payments received for goods sold or services rendered
• Income from contracts and commissions
• Platform payouts (Fiverr, Upwork, Jumia, Konga, ride-hailing platforms)
• Cash and bank transfer payments from clients
• Foreign-sourced income if you are a Nigerian tax resident (converted at the prevailing CBN exchange rate on the date of receipt)
• Interest earned on business bank accounts
• Any other income arising from your business activities

Use your business bank statements, invoices, platform earnings reports, and payment records to compile the total. If you operate primarily in cash, you will need a cash receipts book or daily sales record. The more complete your records, the easier the computation — and the stronger your position if the State IRS queries your return.

Step 2: Deduct Allowable Business Expenses

The NTA 2025 allows self-employed individuals to deduct expenses “wholly, exclusively, and necessarily” incurred in producing the business income. The key word is “necessarily” — the expense must be directly connected to earning the income, not personal in nature.

Expenses You Can Deduct

• Rent for business premises. Office rent, workshop rent, or the portion of your home used exclusively for business (calculated as a percentage of total home rent based on the area used).
• Staff costs. Salaries, wages, and statutory contributions (pension, NHF, NHIS) for employees you hire. If you employ people, you also have PAYE withholding obligations as an employer.
• Professional fees. Accountant fees, legal fees, business registration costs, professional body subscriptions.
• Internet and phone. Data subscriptions, internet bills, and phone costs used for business. If you use one phone for business and personal use, claim the business portion only.
• Software and tools. Subscriptions to business tools — design software, project management platforms, accounting software, cloud storage, website hosting.
• Equipment and supplies. Computers, printers, cameras, tools of trade, stationery, packaging materials. Items costing above ₦50,000 are typically capitalised and claimed as capital allowances rather than immediate expenses.
• Transport and travel. Fuel, vehicle maintenance (business portion), ride-hailing costs for client meetings, inter-city travel for business. Keep receipts and a log distinguishing business from personal trips.
• Marketing and advertising. Social media advertising, business cards, signage, website costs, promotional materials.
• Bank charges. Transaction fees, POS charges, transfer fees on your business account.
• Bad debts. Amounts owed to you by clients that have become irrecoverable. Must be specifically identified and written off in your records — a general provision is not deductible.
• Insurance. Business insurance premiums (professional indemnity, product liability, fire and burglary on business assets).
• Training and development. Course fees, conference attendance, books, and training materials directly related to your profession.

Expenses You Cannot Deduct

• Personal living expenses (groceries, personal clothing, entertainment)
• Capital expenditure (purchase of major assets — these are claimed through capital allowances, not as expenses)
• Depreciation (not deductible; capital allowances replace depreciation for tax purposes)
• Fines and penalties (including tax penalties)
• Donations (unless to a fund or body approved by the government, and subject to limits)
• Tax payments themselves (income tax is not a deductible expense)
• Entertainment and hospitality (generally not deductible unless you can demonstrate it was wholly and exclusively for business)

The result after deducting allowable expenses from gross income is your adjusted profit — also called your net business income.

Step 3: Claim Capital Allowances

If you purchased business assets during the year — a laptop, a vehicle, office furniture, machinery, or any equipment used in your trade — you cannot deduct the full cost as an expense in the year of purchase. Instead, you claim capital allowances, which spread the tax relief over several years.

Under the NTA 2025, capital allowances consist of an initial allowance (claimed in the year the asset is first used) and an annual allowance (claimed each year until the cost is fully written off). Common rates include:

For example, a freelance photographer who purchases a camera kit for ₦2,000,000 can claim an initial allowance of ₦1,000,000 (50%) in the first year and an annual allowance of ₦250,000 (25% of the reducing balance) in subsequent years. The capital allowance reduces your adjusted profit further, giving you your chargeable income for the tax bands.

Step 4: Apply Personal Deductions

Before applying the tax bands, self-employed individuals can claim the same personal deductions available to employees:

• Voluntary pension contribution. Self-employed persons are not mandated under the Pension Reform Act 2014 to contribute to the Contributory Pension Scheme, but they may do so voluntarily. Contributions up to 20% of annual income to a Retirement Savings Account (RSA) with a licensed Pension Fund Administrator are tax-deductible.
• Rent relief. 20% of annual rent paid, capped at ₦500,000. Requires tenancy agreement, rent receipts, or bank transfer evidence. If your home is also your office, this is your personal rent — separate from any business premises rent already claimed as a business expense.
• National Housing Fund. 2.5% of basic income, where you participate voluntarily.
• National Health Insurance Scheme. Voluntary contributions under NHIS, where applicable.
• Life insurance premiums. Actual premiums paid on a qualifying life insurance policy with a Nigerian insurer.

Note that the Consolidated Relief Allowance (CRA) — 20% of gross income plus ₦200,000 — has been abolished under the NTA 2025. If you or your accountant applied CRA in your last return, it no longer applies from the 2026 tax year.

Step 5: Apply the NTA 2025 Tax Bands

Once you have your chargeable income — gross income minus business expenses minus capital allowances minus personal deductions — apply the progressive tax bands:

If your chargeable income is ₦800,000 or below, your tax liability is zero.

Worked Example: Sole Proprietor With ₦12,000,000 Gross Income

Adaeze runs a catering business in Abuja as a sole proprietor. Here are her numbers for 2026:

Tax calculation:

Adaeze’s effective tax rate is 1.9% of gross income — because legitimate business expenses, capital allowances, and personal deductions reduce her chargeable income significantly. Without those deductions, her tax would be far higher. This is why record-keeping matters.

Worked Example: Freelance Consultant With ₦25,000,000 Gross Income

Emeka is a freelance management consultant based in Lagos. His 2026 figures:

Tax calculation:

Before applying WHT credits. Emeka’s corporate clients deducted 5% WHT on his consulting fees during the year. If total WHT deducted was ₦1,250,000 (5% of ₦25,000,000), he claims this as a credit against his tax liability. Remaining tax payable: ₦2,685,000 − ₦1,250,000 = ₦1,435,000.

Step 6: Pay Tax in Instalments During the Year

Unlike employees who have PAYE deducted monthly, self-employed individuals must make their own tax payments during the year. The NTAA 2025 operates on a self-assessment basis — you estimate your income for the current year, compute the expected tax, and pay it in instalments.

In practice, most State IRS offices require quarterly or bi-annual instalment payments based on your prior year’s assessment. This means if your 2026 tax liability was ₦2,000,000, the State IRS expects you to pay approximately ₦2,000,000 in instalments during 2027, with any over-payment or under-payment adjusted when you file your annual return.

The exact payment schedule varies by state. Lagos (LIRS), for instance, requires quarterly payments. Other states may accept two or three payments spread across the year. Contact your State IRS or check their portal for the specific instalment schedule that applies to you.

Failing to make instalment payments does not create a separate penalty — but it means your entire tax liability becomes due on the filing date. If you cannot pay the full amount at once, plus any interest or penalties for underpayment, you face compounding enforcement action.

Step 7: Collect and Claim WHT Credits

If you provide services to companies, those companies are required to deduct withholding tax (WHT) from your invoices before paying you. The standard WHT rate for consultancy, management, and professional fees paid to individuals is 5%. For rent, dividends, and interest, the rate is 10%.

Each time a client deducts WHT, they should issue you a WHT credit note — a receipt showing the amount deducted, the date, the client’s TIN, and the WHT reference number. Collect these credit notes throughout the year and present them when filing your annual return. The WHT already deducted is credited against your tax liability — you only pay the difference.

If your total WHT credits exceed your computed tax liability (which happens when expenses and deductions bring your taxable income down significantly), you are entitled to a refund or a credit carried forward to the next year. In practice, refunds from State IRS offices take time, so most self-employed taxpayers carry the credit forward.

What If a Client Did Not Issue a WHT Credit Note?

Follow up with the client. Without the credit note, the State IRS may not accept the WHT deduction as a credit against your liability. You need the official note — an invoice showing the deduction is not sufficient on its own. If the client cannot provide one, escalate to their tax department or accountant. You are legally entitled to the credit note for every WHT deduction made on your payments.

Step 8: File Your Annual Return by 31 March

Self-employed individuals must file their annual personal income tax return with the State Internal Revenue Service of their state of residence by 31 March of the year following the assessment year. Your 2026 return is due by 31 March 2027.

The return should include:

• A statement of your gross business income for the year
• A schedule of business expenses claimed, with supporting documentation
• A capital allowances computation for any business assets
• Personal deduction claims (pension, rent relief, NHF, NHIS, life insurance)
• Your chargeable income and tax computation
• Details of instalment payments made during the year
• WHT credit notes for all WHT deducted by clients
• Evidence of any other tax payments

Most State IRS offices now accept electronic filing through their web portals. Lagos uses eTax (etax.lirs.net). Other states have similar platforms or accept physical filings at their offices. Some states require self-employed persons to file through an accredited tax agent — check your State IRS requirements.

The Penalty for Late Filing

Under NTAA Section 101, late filing attracts ₦100,000 for the first month and ₦50,000 for each subsequent month of default. Under Section 127, failure to file a return can result in a fine of ₦1,000,000 or imprisonment for up to three years, or both. These penalties apply whether you owe tax or not — filing is a separate obligation from payment.

VAT Obligations for the Self-Employed

If your business supplies taxable goods or services, you are required to register for VAT with the NRS. Under the NTA 2025, there is no minimum turnover threshold for VAT registration — any person who makes taxable supplies must register. VAT is charged at 7.5% on the value of taxable goods and services.

Once registered, you must charge VAT on your invoices, file monthly VAT returns by the 21st of the following month, and remit the net VAT (output VAT charged to customers minus input VAT paid on business purchases) to the NRS via the NRS Self-Service Portal.

However, the NTAA provides a practical exemption: businesses with annual turnover of ₦50,000,000 or below are not required to file VAT returns, though they may still register voluntarily. If you are a sole proprietor earning less than ₦50,000,000 per year, you are unlikely to need to file VAT returns — but you should confirm your obligation with your State IRS or a tax professional, especially if you supply goods or services to VAT-registered companies that expect to receive VAT invoices.

VAT is a separate obligation from personal income tax. It does not reduce your taxable income (output VAT collected is not your income; input VAT paid is not your expense). Keep your VAT and PIT records separate but cross-referenced.

Record-Keeping Requirements

The NTAA 2025 requires all taxpayers to maintain records for a minimum of six years. For self-employed individuals, this means keeping:

• Bank statements for all business accounts (and personal accounts where business transactions occur)
• Invoices issued to every client
• Receipts for every business expense claimed
• Contracts, engagement letters, and client agreements
• WHT credit notes received from clients
• Tenancy agreements and rent receipts (for rent relief and business premises deduction)
• Pension contribution statements (for voluntary pension deduction)
• Asset purchase receipts and capital allowance computations
• Monthly and annual tax filing confirmations
• VAT invoices and returns (if VAT-registered)

If the State IRS conducts a tax audit and you cannot produce records to support your expense claims, those deductions will be disallowed. Your taxable income will be increased, and additional tax, penalties, and interest will apply. Proper record-keeping is not just good practice — it is the foundation of your entire tax position.

Common Mistakes Self-Employed Taxpayers Make

• Not filing at all. Many self-employed Nigerians do not file tax returns because they believe only salaried employees are taxed. If you earn income from a business, you are required to file. The State IRS uses bank records, corporate WHT filings, and platform data to identify non-filers.
• Not claiming business expenses. Some self-employed persons report gross income without deducting allowable expenses — either because they do not know they can claim them or because they did not keep receipts. This results in paying far more tax than necessary.
• Claiming personal expenses as business costs. The opposite mistake: deducting personal rent, personal vehicle costs, family meals, or personal phone bills as business expenses. If audited, disallowed expenses result in additional tax plus penalties.
• Ignoring WHT credits. Every 5% WHT deducted by a client is a credit against your tax liability. If you do not collect and claim WHT credit notes, you are paying tax twice on the same income — once through WHT and once through your annual return.
• Still applying CRA. The Consolidated Relief Allowance (20% of gross plus ₦200,000) was abolished by the NTA 2025. If your computation includes CRA, your chargeable income and tax are both wrong.
• Using the old PITA tax bands. The 7%/11%/15%/19%/21%/24% bands expired on 31 December 2025. All computations from the 2026 tax year must use the NTA 2025 bands (0% to 25%).
• Not making instalment payments. Waiting until filing to pay the entire year’s tax creates cash flow pressure and may attract interest. Spread payments throughout the year using the instalment schedule from your State IRS.
• Mixing personal and business finances. Operating without a separate business bank account makes it nearly impossible to accurately determine business income and expenses. Open a dedicated business account, even if it is a basic current account, and run all business transactions through it.

When to Consider Incorporating

As a sole proprietor, your business income is taxed at personal income tax rates (up to 25%). If your annual turnover is ₦50,000,000 or below, your gross assets are ₦250,000,000 or below, and you do not provide professional services (legal, accounting, consulting, engineering, medical), you could register a limited liability company and potentially qualify for 0% CIT as a small company under NTA Section 56.

However, incorporating solely for the tax benefit requires careful analysis. A company must file CIT returns, maintain statutory records, hold annual general meetings, file with the CAC, and potentially pay development levy (4% of assessable profits). The administrative burden may outweigh the tax saving, especially for smaller operations. Discuss the trade-offs with a tax professional from our Tax Professional Directory before making the decision.

Final Thoughts

Self-employed tax in Nigeria under the NTA 2025 follows a straightforward sequence: total your business income, deduct allowable expenses, claim capital allowances, apply personal deductions (voluntary pension, rent relief), and run the result through six progressive tax bands. The maths is not the hard part. The hard part is the discipline — keeping receipts for every expense, collecting WHT credit notes from every client, making instalment payments throughout the year, and filing by 31 March.

The reward for doing it properly is significant. Adaeze turned ₦12,000,000 in gross income into ₦229,500 in tax — an effective rate under 2% — entirely through legitimate deductions and allowances. The self-employed taxpayer who keeps good records and claims everything they are entitled to will always pay substantially less than one who does not.

Compute your tax position with our PAYE Calculator or ask a specific question to our AI Tax Assistant. For complex situations — multiple income streams, foreign income, incorporation decisions — connect with an accredited specialist through the Tax Professional Directory. For official guidance on self-assessment and filing, visit nrs.gov.ng.

FAQs About Self-Employed Tax in Nigeria

Do self-employed people pay the same tax rates as salaried employees?

Yes. The NTA 2025 applies the same six progressive tax bands (0% on the first ₦800,000 up to 25% above ₦50,000,000) to all personal income, whether from employment or self-employment. The difference is that self-employed individuals can deduct business expenses and capital allowances before applying the bands, which salaried employees cannot.

What is the deadline for filing a self-employed tax return?

31 March of the year following the assessment year. Your 2026 return is due by 31 March 2027. Late filing attracts ₦100,000 for the first month and ₦50,000 for each subsequent month under NTAA Section 101.

Can I deduct rent, internet, and transport as business expenses?

Yes, provided these expenses are wholly, exclusively, and necessarily incurred for business purposes. Business premises rent, internet used for work, and transport for client meetings are deductible. Personal rent is not a business expense but qualifies for rent relief (20% of rent paid, max ₦500,000) as a separate personal deduction.

What if my clients already deducted withholding tax?

WHT deducted by your clients is a credit against your personal income tax liability. Collect the WHT credit note from each client and present them when filing your return. You only pay the difference between your computed tax and the total WHT already deducted. If WHT exceeds your tax, you can carry the credit forward.

Do I need to register for VAT as a self-employed person?

If you supply taxable goods or services, you are technically required to register for VAT with the NRS. However, businesses with annual turnover of ₦50,000,000 or below are not required to file VAT returns under the NTAA. Most sole proprietors earning below this threshold are effectively exempt from the VAT compliance burden, but confirm with your State IRS.

What records do I need to keep?

Bank statements, invoices, expense receipts, contracts, WHT credit notes, rent receipts, pension statements, asset purchase records, and all tax filing confirmations — for a minimum of six years. If you cannot produce records to support a deduction during an audit, the deduction will be disallowed and additional tax, penalties, and interest will apply.

Should I incorporate my business to pay less tax?

Potentially. If your turnover is ₦50,000,000 or below and you do not provide professional services, a limited liability company could qualify for 0% CIT under NTA Section 56. However, incorporation brings additional compliance obligations — CIT returns, CAC filings, development levy, and statutory record-keeping. The decision depends on your specific income level, business type, and appetite for administrative work. Consult a tax professional before incorporating solely for tax reasons.