Tax on business profit after reliefs.
Income tax due
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Chargeable income
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Net after tax
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No employer, no PAYE, no excuses
When you run your own business as a sole trader or earn a living freelancing, there is no payroll department quietly deducting tax before the money reaches you. The full responsibility sits with you, and it lands once a year as a personal income tax bill on your profit. This tool estimates that bill. It starts from your net annual business profit, the income left after the costs of earning it, subtracts the personal reliefs you can claim, and runs the remainder through Nigeria's progressive income tax bands. It is built for the self-employed person who needs to know, today, roughly how much of this year's profit belongs to the tax authority so they can set it aside rather than spend it.
The word profit is doing the heavy lifting. You are taxed on profit, not turnover. If you bill NGN 12 million but spend NGN 4 million on the legitimate costs of running the business, your profit is NGN 8 million, and that is the figure to enter. Getting this distinction right is the difference between a tax estimate that helps you and one that frightens you for no reason.
The band that catches the self-employed off guard
Here is the structural point that trips up people moving from employment to self-employment. The full exemption for earners at or below the national minimum wage applies to employment income, not to business income. So this tool does not apply it. Your business profit is taxed straight on the bands from the bottom up, with the benefit of the tax-free floor but without the minimum-wage shelter that a salaried worker on very low pay would enjoy. As modelled here, the first NGN 800,000 of chargeable income is tax-free, the next slice to NGN 3 million is taxed at 15 percent, NGN 3 million to NGN 12 million at 18 percent, then 21 percent to NGN 25 million, 23 percent to NGN 50 million, and 25 percent above that. Those are the bands this calculator applies under the reformed regime, and because the 2025 reforms are still phasing in around 2026, you should confirm the current bands and the treatment of business income with the Federal Inland Revenue Service and your state internal revenue service, which is where individuals file.
Reliefs still help. Pension contributions, NHIS, life-insurance premiums, and rent relief all reduce your chargeable income before the bands apply. Rent relief here is 20 percent of your annual rent, capped at NGN 500,000, whichever is lower. Enter what you genuinely pay and the base shrinks legitimately.
Tax on an NGN 8 million profit, no reliefs entered
Take a freelancer whose net profit for the year is NGN 8 million, with no reliefs entered. Chargeable income is the full NGN 8 million. The first NGN 800,000 is tax-free. The slice from NGN 800,000 to NGN 3 million, which is NGN 2.2 million, is taxed at 15 percent, giving NGN 330,000. The slice from NGN 3 million to NGN 8 million, which is NGN 5 million, is taxed at 18 percent, giving NGN 900,000. Total tax is NGN 1,230,000, leaving NGN 6,770,000 after tax. These figures use the rates this calculator applies.
Set aside as you earn, not at year end
The discipline that separates self-employed people who sleep well from those who panic in filing season is simple: move a slice of every payment into a separate account the moment it arrives. On a profit around NGN 8 million, the effective tax rate is roughly 15 percent of profit, so setting aside about a fifth of each receipt comfortably covers the bill and leaves a little spare. As your profit climbs into the 21 and 23 percent bands, raise the share you reserve, because the marginal rate on each extra naira is higher than your average rate. The single most common mistake among the newly self-employed is treating gross receipts as spendable income, then discovering at filing that a chunk was never theirs.
Keep clean records of both income and costs. Your profit, and therefore your tax, depends on the expenses you can legitimately claim against the business, and those need documentation to stand up. This tool models the personal reliefs of pension, NHIS, life insurance, and rent, not your full schedule of business expenses, so the real chargeable figure may be lower once allowable trading costs are deducted before profit. Where you operate also matters, because personal income tax is collected by the internal revenue service of your state of residence, and registration there is part of being compliant.
Do I owe tax if my business made very little this year?
Possibly not, if your chargeable profit falls within the tax-free floor, but do not assume the minimum-wage exemption rescues you the way it would a low-paid employee. Business income is taxed on the bands from the first naira above the tax-free amount. A genuinely small profit may produce little or no tax simply because most of it sits in the zero band, but you may still have a filing obligation, so check with your state revenue service rather than staying silent.
What about withholding tax my clients deducted?
This tool computes tax on your profit and does not net off withholding tax that clients may have deducted at source. If your clients withheld tax on your fees, that is an advance against this bill, and you would credit it when you file, reducing what is still due. To model that credit explicitly, use a freelance income tax tool that accounts for withholding tax separately, and keep every credit note your clients issue.