Nigerian tax software for SMEs: VAT, PAYE and the 2026 tax law

From January 2026, taxable income is annual gross pay less the employee’s pension and rent relief (20% of annual rent paid, up to ₦500,000). There is no Consolidated Relief Allowance any more. PAYE is then charged on these bands:

Each payroll month uses the rules for that month. Months up to December 2025 are worked out under the old Personal Income Tax Act. A draft month can be recalculated; a confirmed month is never changed. If a 2026 month was confirmed before Yako applied the new bands, it is listed so you and your accountant can decide whether to adjust a later remittance.

• Pension at 8% from the employee and 10% from the employer, NSITF at 1%, and ITF at 1% when you have five or more employees.
• Confirming a month posts one balanced journal for the full cost of the payroll.
• PAYE is grouped by each employee’s state of residence, because that is where it must be paid. Pension and NSITF are federal.
• Each remittance becomes a tax obligation with its deadline, so nothing owed is forgotten.

Under the new law, a small company pays 0% company income tax and no development levy. Others pay 30% company income tax and the 4% development levy. Yako sets this from your classification and checks it against your books.

• Turnover within the limit. The two published texts of the Act differ (₦50 million and ₦100 million), so Yako uses ₦50 million until the final text is settled. Confirm with your accountant.
• Fixed assets within ₦250 million.
• Not professional services. Law, accounting, consulting, advertising and similar firms are never small, whatever their size.

The classification card shows the revenue posted in the last 12 months and the fixed assets you hold, says whether you qualify, and gives the reason when you don’t.

• Output VAT on the invoices you issue, less credit notes, less input VAT on your bills.
• From 2026, input VAT on services and fixed assets is included, as the new Act allows. Returns for earlier periods warn you that it wasn’t recoverable then.
• Invoices and bills in other currencies are converted to naira at the rate for their date. A document with no rate is left out and named, never added at face value.
• Each line is marked standard, zero-rated, exempt, out of scope or reverse charge.
• Invoices are titled Tax Invoice when you have a Tax ID, and show your Tax ID and your customer’s.

Give an expense account its withholding rate, and every bill posted to it calculates the tax to withhold for that supplier. Each one becomes an obligation, so the remittance is tracked until it is paid.

For each tax and period, Yako compares what the books say you owe, what you declared and what you paid, and shows the amount at risk. You file on the tax authority’s portal yourself, or your accountant does, then record the filing and attach the receipt in Yako. Read more about VAT and tax compliance.

Nigeria is introducing e-invoicing through the NRS Merchant-Buyer Solution, with emerging businesses going live on 1 July 2027. We’re preparing Yako for it, and invoices already carry the details it needs, such as tax numbers and each line’s VAT treatment. Yako’s e-invoicing isn’t live yet.

Tax law changed a lot in 2026, and some of it is still being clarified. Yako does the arithmetic and keeps the evidence; your accountant or tax adviser applies their judgement. Give them time-limited access to review payroll and returns before you file. See pricing.