The Nigerian entrepreneurial spirit is thriving on campus. You see it everywhere: students balancing lectures with running digital services, freelance gigs, e-commerce stores, craft businesses, small-scale manufacturing, social media influencing, and content creation, amongst others. With the news spreading all around, it is best to be informed and to be informed correctly. If you earn an income as a student, this law applies to you (because you are a taxable person). Understanding the NTA 2025 is critical, not just for compliance but for maximising the financial reliefs designed to support small businesses and encourage formalisation.
The purpose of the NTA 2025 is simple: to create a clearer, fairer system. The government wants to encourage small businesses and formalise the economy, not ‘ruin’ your hustle. By simplifying the rules and offering tax breaks to low-income earners, the reforms aim to support Micro, Small, and Medium Enterprises (MSMEs), the backbone of job creation. Your compliance is key to making this new system work for your business.
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Often, student businesses are unregistered, undefined, and lack formal structure, which can make adherence to new laws confusing. Unlike previous assumptions, the NTA 2025 classifies companies into two main, distinct categories: Small Companies and Large Companies. However, there are different ways a business can be registered in Nigeria, and that is where Sole Proprietorship comes in, typically registered as a ‘Business Name.’
The NTA 2025 does not exclude creatives (for example, graphic designers, social media influencers) or our people in tech. They are officially brought into the tax net. For you as an entrepreneur or creative, this law presents both a challenge and an opportunity to professionalise your venture. Income from sales of goods, rendering of services, freelance contracts, and brand sponsorships is treated the same way under the new law. The crucial thing is understanding which structure your business falls under.
If Unregistered or Registered as a Business Name: You Are a Sole Proprietorship
For businesses that are unregistered or registered simply as a Business Name with the Corporate Affairs Commission (CAC), the law does not classify you as a ‘company.’ Instead, the owner (entrepreneur/influencer/creative) is treated as an individual who earns income from self-employment. This means your entire business earnings are treated as Personal Income and are subject to Personal Income Tax (PIT), which is payable to the State Internal Revenue Service (SIRS) where you are resident. The good news is that the NTA 2025 provides major relief to low-income earners. The first ₦800,000 of your annual gross income is fully tax-exempt (0%). This means if your business or freelance profit is ₦800,000 or less annually, you will pay zero income tax. For income earned above ₦800,000, the progressive PIT regime applies. This system taxes income in bands, starting at a 15% rate for earnings above ₦800,001 up to ₦3,000,000, and increasing gradually up to a maximum of 25% for the highest earners. If your business is small and barely makes up to ₦800,000 annually, you need not worry about paying tax, but you must still file your returns.
If Incorporated: You May Qualify as a Small Company
If your earnings (Business profits, influencing gigs, design gigs, trade earnings) are consistently above the ₦800,000 threshold and you wish to take advantage of the most significant corporate tax relief, it is highly advisable to formally incorporate your business as a Small Company with the CAC. The NTA defines a Small Company as a business whose annual gross turnover does not exceed ₦100 million and whose total fixed assets do not exceed ₦250 million.
For businesses that meet the Small Company criteria, the NTA 2025 offers profound financial advantages. The most significant benefit is the 0% corporate tax rate. Small Companies are completely exempt from paying the main corporate tax (Companies Income Tax or CIT), the 4% Development Levy, and Capital Gains Tax (CGT). Furthermore, they are also exempt from charging and collecting Value Added Tax (VAT). These measures are designed to free up capital for reinvestment and growth in small businesses.
What Steps must Student Entrepreneurs or creatives take?
- Business Registration and Formalisation: If your earnings are above ₦800,000, it is advisable to consider formalising your business with the Corporate Affairs Commission (CAC). Formalisation is especially beneficial if your business meets the Small Company criteria, which are defined by a Turnover of ₦100 million and Fixed Assets of less than or equal to ₦250 million; meeting these criteria allows the business to gain the full benefit of a 0% Company Income Tax.
- Separate Personal and Business Finances: It is paramount that you separate your business account from your personal account. This clearly defines your annual turnover, preventing the Tax Authorities from assessing your personal expenses as business income, and helps you keep track of your sales and purchases.
- Obtain a Tax Identification Number (TIN): A TIN is mandatory for any self-employed person or formal business operation and is necessary for filing returns.
- Mandatory Annual Filing: Tax exemption does NOT mean exemption from filing returns. All businesses and self-employed individuals must file their annual tax returns with the relevant tax authority. Failure to file attracts significant penalties, regardless of the amount of tax owed.