The Hidden Shift: Nigeria Replaces the Consolidated Relief Allowance With Rent Relief

The Nigeria Tax Act, 2025 took effect on 1 January 2026 and introduced a new personal income tax structure, including a ₦800,000 tax free band and new income tax rates. It also removed the old CRA.

For anyone who earns income personally, especially freelancers and self employed professionals, this change affects how taxable income is calculated.

What happened to the old CRA?

Under the previous Personal Income Tax Act, the Consolidated Relief Allowance gave individuals a relief calculated as 20% of gross income plus the higher of ₦200,000 or 1% of gross income.

In practice, this meant the allowance could reach 21% of gross income for higher earners.

That system has now been removed.

The new framework instead provides a rent relief equal to 20% of annual rent actually paid, subject to a maximum of ₦500,000.

So the relief is now tied to an expense rather than being a general allowance based on income.

How does the new rent relief work?

The calculation is fairly simple.

If you pay ₦1 million in annual rent, 20% would be ₦200,000.

If you pay ₦2 million, 20% would be ₦400,000.

If you pay ₦3 million, 20% would be ₦600,000, but the relief is capped at ₦500,000.

The relief therefore cannot exceed ₦500,000, regardless of how much rent you pay.

The relief is also separate from the new ₦800,000 tax free band. The first ₦800,000 of taxable income is taxed at 0%, while the rent relief is applied as a deduction when determining taxable income.

What if you own your home?

This is one of the important differences between the old and new systems.

Because the new relief is specifically connected to rent actually paid, someone who owns their home and does not pay rent cannot claim the rent relief.

KPMG’s explanation of the new framework similarly notes that homeowners and people who do not pay rent are not eligible for the relief.

That does not mean homeowners have no deductions available at all. The new framework retains certain other deductions and reliefs, including qualifying pension and National Housing Fund contributions, life insurance premiums and interest on loans used to develop an owner occupied residential house, subject to the applicable conditions.

Your rent needs to be properly documented

There is another important part of the change: you cannot simply claim an amount because you say you pay rent.

The rent relief requires the taxpayer to accurately declare the actual rent paid and provide supporting information when required by the relevant tax authority.

This makes documentation important.

If you are a freelancer paying rent, keep evidence that supports the amount you declare. Depending on your circumstances, this could include your tenancy agreement, rent receipt, payment evidence and other relevant records.

The exact process for verifying the claim may depend on the relevant tax authority and its implementation procedures.

What does this mean for freelancers?

For freelancers, the change makes financial record keeping more important.

Your income records show what you earned. Your business expense records help establish qualifying expenses. Your rent records can support a personal rent relief claim where you are eligible.

For example, imagine a freelancer earns ₦10 million in a year and pays ₦1.5 million in annual rent.

Twenty percent of the rent is ₦300,000. If the freelancer meets the requirements for the relief and properly declares the rent, that ₦300,000 can be deducted under the rent relief provision when determining taxable income.

The calculation is not the same as receiving ₦300,000 in cash. It reduces the income on which tax is calculated.

The bigger change

The removal of the CRA changes the way individuals should think about their tax records.

Previously, the main personal relief was largely tied to a formula based on income. Under the new system, the rent relief is connected to an actual expense and requires the taxpayer to declare what was paid.

That means keeping records is no longer something to think about only when filing your tax return.

For freelancers, it makes sense to keep income records, payment evidence, invoices, qualifying expenses and rent documentation organised throughout the year.

LessaTax is built to help with that part of tax compliance by keeping your financial records organised, so you have the information you need when it is time to calculate your taxable income and prepare your return.

The tax system has changed. Your record keeping should change with it.