AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
The short answer
Yes, if your total taxable income is above ₦800,000 a year. Under the Nigeria Tax Act 2025, side income is added to your other income and taxed on the same progressive bands, and you declare it on an annual return with your state tax authority, usually by 31 March.
The short version
Nigeria's personal income tax applies to residents' income from all sources, not just salary. The Nigeria Tax Act 2025, in force from 1 January 2026, sets a tax-free band for the first ₦800,000 of taxable income a year and taxes the rest on progressive bands. Your employer deducts PAYE only on your salary, so tax on any side income is your responsibility to declare and pay.
The 2026 tax bands
| Annual taxable income band | Rate |
|---|---|
| First ₦800,000 | 0% |
| Next ₦2,200,000 | 15% |
| Next ₦9,000,000 | 18% |
| Next ₦13,000,000 | 21% |
| Next ₦25,000,000 | 23% |
| Above ₦50,000,000 | 25% |
Each rate applies only to the slice of income within its band. For more on how PAYE uses these bands, see Nigeria PAYE tax bands for 2026.
How side income adds to your tax
Because side income sits on top of your salary, it is taxed at the rate of the band your total income reaches. That means the side income is often taxed at your highest rate, even though your salary uses up the lower bands first.
Example only. Kemi's salary gives her taxable income of ₦2,400,000 a year after pension, NHF and rent relief. She also earns ₦600,000 a year in profit from weekend photography.
| Salary only | Salary plus side income | |
|---|---|---|
| Taxable income | ₦2,400,000 | ₦3,000,000 |
| Tax on first ₦800,000 | ₦0 | ₦0 |
| Tax at 15% | ₦240,000 (on ₦1,600,000) | ₦330,000 (on ₦2,200,000) |
| Tax at 18% | ₦0 | ₦0 |
| Total tax | ₦240,000 | ₦330,000 |
| Extra tax from side income | — | ₦90,000 (15%) |
If Kemi's side profit grew to ₦1,200,000, her taxable income would be ₦3,600,000. Tax would be ₦330,000 on the 15% band plus ₦108,000 at 18% on the last ₦600,000, a total of ₦438,000. Her side income would then cost ₦198,000 in tax, about 16.5% of it.
If your side income is small
Not everyone with a side income will owe more tax. If your total taxable income, salary plus side profit, stays at or below ₦800,000 a year, it falls within the 0% band. People earning at or below the national minimum wage are also exempt. But being exempt from paying is not always the same as being exempt from filing, so check with your state tax authority whether you still need to submit a return.
As the side income grows, review your position each year. Once it becomes regular, registering it as a business and keeping its money separate makes filing simpler and gives you records that help with rent, credit and visa applications.
Who has to file
Freelancers, self-employed people, business owners and employees with income beyond their salary are expected to file an annual self-assessment return with the State Internal Revenue Service where they live. Lagos, for example, requires individual returns covering the previous calendar year by 31 March, filed through the LIRS eTax portal, and says filing is required even where tax was already deducted through an employer. Late filing can attract penalties and interest.
What you need
- A Tax Identification Number (TIN).
- Records of all income: salary, side income, rent received, and foreign earnings if you are resident.
- Records of costs related to your side work.
- Evidence for reliefs, such as rent receipts and pension statements.
- Your employer's PAYE record for the year.
Allowable costs
Keep receipts for the costs of earning your side income, such as materials, equipment, data and transport for jobs. Ask your state tax authority which costs can be deducted before working out your taxable profit, and keep records for several years in case of questions.
How much to set aside
A practical approach is to move a fixed share of every side payment into a separate tax pot as it arrives, based on the band your total income falls in. If your salary already takes you into the 15% band, 15% of side profit is a sensible starting point. If you are close to or above ₦3,000,000 taxable income, use 18% or more. Overestimating is safer: any surplus becomes savings once your return is filed.
Common mistakes
- Assuming PAYE covers everything. It covers salary only.
- Not counting foreign client payments. Residents are taxed on worldwide income.
- Spending tax money during the year and scrambling in March.
- Keeping no records, which makes it harder to claim costs or answer questions.
- Ignoring the deadline because no one has asked. Penalties can still apply.
Where Pryme fits
A Naira Savings Box makes a simple tax pot: move your set share into it each time a client pays, with rates shown in the app. Keeping side income in its own account or Box also gives you a clear record for your return. If you are paid in dollars, pounds or euros, a multicurrency account keeps the money in the currency it arrived in until you choose to convert with Swap. You can also generate verifiable statements with VerifyDoc.ai when you need to show income.
Questions people ask
Is side hustle income taxable in Nigeria?
Yes. Residents are taxed on income from all sources, and side income is added to salary when working out tax under the Nigeria Tax Act 2025.
Do I need to file tax returns if my employer deducts PAYE?
If you have income beyond your salary, yes. Lagos says individuals must file annual returns even where PAYE was deducted.
What is the tax-free income limit in Nigeria in 2026?
The first ₦800,000 of annual taxable income is taxed at 0% under the Nigeria Tax Act 2025.
When is the deadline to file personal tax returns?
Lagos sets 31 March for individual returns covering the previous year. Check your own state tax authority for its deadline.
Sources
- Step-by-step calculation: deductions and personal income tax under the 2026 reforms (BusinessDay) · accessed Oct 2026
- Explainer: Who will pay under Nigeria's new tax laws (The Guardian Nigeria) · accessed Oct 2026
- Lagos alerts taxpayers to March deadline for filing individual annual returns (ICIR) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.