If nobody deducts tax from your income before you receive it, this article is for you.
Whether you're a freelance graphic designer, an Uber driver, a content creator monetizing YouTube or TikTok, a consultant, a trader selling on Instagram, or someone earning from Upwork and Fiverr — you're self-employed in the eyes of the tax law. And that means your tax situation is completely different from someone with a regular 9-to-5.
Here's the difference in one line: nobody handles tax for you. You're responsible for everything.
Who Counts as "Self-Employed"?
Under the Nigeria Tax Act 2025, you're self-employed if you earn income without an employer deducting PAYE from your pay. This includes:
- Freelancers — designers, writers, developers, photographers, videographers
- Gig workers — Uber/Bolt drivers, delivery riders, task-based workers
- Content creators — YouTubers, TikTokers, podcasters, bloggers earning ad revenue or sponsorships
- Consultants — management, IT, HR, marketing consultants working independently
- Traders — people selling online (Instagram, Jumia, Konga) or in physical markets without being employed by anyone
- Professionals in private practice — doctors, lawyers, accountants running their own practices (as sole proprietors, not companies)
- Artisans and service providers — electricians, plumbers, tailors, hairdressers running their own businesses
If you earn money and nobody takes tax out before paying you — you're in this category. NTA 2025 treats all gig workers and independent earners as self-employed with full tax obligations.
How Self-Employed Tax Works: The Basic Formula
Revenue − Allowable Expenses = Profit. Profit is taxed at the progressive PIT rates. That's it. Your tax is based on your profit — not your total revenue. The expenses you can deduct make a massive difference.
This is fundamentally different from PAYE. An employed person's gross salary gets taxed (after pension and NHF). A self-employed person's PROFIT gets taxed — meaning you subtract legitimate business expenses first.
The ₦800,000 Threshold: You Might Owe ₦0
Here's the best part of the new system for smaller earners: if your annual PROFIT (not revenue) is ₦800,000 or less, you owe ₦0 in tax.
Chidi is a freelance graphic designer.
Annual revenue from clients: ₦2,400,000
Business expenses (laptop, software, internet, workspace): ₦1,700,000
Profit: ₦2,400,000 − ₦1,700,000 = ₦700,000
₦700,000 is below the ₦800,000 threshold → Chidi owes ₦0 in tax.
But he still needs to file a return declaring this income. Filing ≠ paying.
This threshold protects people who earn modest amounts — but only if you track your expenses properly and can prove them.
What Counts as Allowable Expenses?
This is where most self-employed people either save a lot of money or throw it away by not keeping records. Allowable expenses are legitimate business costs you can subtract from your revenue before tax is calculated.
Deductible Business Expenses
- Internet and phone bills (business portion — if you use 70% for work, deduct 70%)
- Equipment — laptop, camera, microphone, phone used for business, tools of trade
- Software subscriptions — Adobe Creative Cloud, Canva Pro, accounting software, project management tools
- Office rent / workspace costs — coworking space membership, home office portion of rent
- Transportation for business — fuel for client meetings, ride-hailing for work trips
- Marketing and advertising — Instagram ads, Google ads, flyer printing, business cards
- Professional development — courses, certifications, conferences, books related to your work
- Professional fees — accountant fees, legal costs for contracts
- Bank charges on business accounts
- Depreciation on business equipment (calculated over the useful life of the asset)
NOT Deductible
- Personal rent (that falls under rent relief — a separate deduction, max ₦500,000)
- Food and groceries
- Clothing (unless it's specifically work uniform/equipment)
- Personal vacations
- Entertainment (unless directly related to client engagement with evidence)
- Fines and penalties
Key rule: An expense is deductible if it was incurred "wholly, exclusively, and necessarily" for the purpose of earning your business income. If it's partly personal and partly business, only the business portion is deductible. Keep records that show the split.
How Tax Is Calculated: A Real Example
Ngozi is a social media consultant in Lagos.
Annual revenue from clients: ₦5,400,000
Allowable expenses:
• Coworking space: ₦600,000
• Internet + phone: ₦180,000
• Laptop (depreciation): ₦200,000
• Software subscriptions: ₦150,000
• Transportation: ₦240,000
• Marketing tools: ₦120,000
• Professional course: ₦100,000
• Total expenses: ₦1,590,000
Taxable profit: ₦5,400,000 − ₦1,590,000 = ₦3,810,000
Apply tax bands:
First ₦800,000 at 0% = ₦0
Next ₦2,200,000 (₦800,001 – ₦3,000,000) at 15% = ₦330,000
Remaining ₦810,000 (₦3,000,001 – ₦3,810,000) at 18% = ₦145,800
Total annual tax: ₦475,800
Effective rate: 8.8% of gross revenue
Notice how Ngozi's effective tax rate is under 9% — even though parts of her income fall in the 18% band. The combination of expense deductions and the ₦800K threshold keeps the real tax burden manageable.
Filing Timeline: When to File
Self-employed individuals file their annual PIT return by 31 March of the following year. So income earned in 2025 is declared on a return filed by March 31, 2026.
You file with the State Internal Revenue Service where you reside — not where your clients are, not where you do work, but where you live.
What You Submit
- Income statement showing total revenue and expenses
- Bank statements showing business income received
- Receipts and evidence for deductions claimed
- Tax computation showing how you calculated your taxable profit
- Evidence of tax payment (if you owe anything)
You Need a Tax ID
Under the new system, your Tax ID is your NIN (National Identification Number). No separate registration is needed. If you have a NIN — which you almost certainly do if you have a bank account or a registered SIM — you already have a Tax ID.
Use your NIN when filing your return and making tax payments.
Self-Assessment: You Calculate Your Own Tax
Unlike employed people (whose employer calculates and deducts PAYE), self-employed people do a self-assessment. That means:
- You track your own income throughout the year
- You track your own business expenses
- You calculate your profit
- You apply the tax bands to determine what you owe
- You pay the tax yourself
- You file the return yourself
Nobody does any of this for you. If you get it wrong or skip it entirely, the consequences (penalties) are on you.
The Gig Economy: Specific Situations
Uber/Bolt Drivers
Your fare income (minus Uber/Bolt's commission) is your revenue. Deduct: fuel, vehicle maintenance, phone data, vehicle depreciation (or lease costs), and insurance. The remainder is your taxable profit.
Emeka drives for Bolt in Abuja.
Annual earnings (after Bolt's cut): ₦3,600,000
Expenses — fuel: ₦1,200,000, maintenance: ₦400,000, phone/data: ₦60,000, depreciation: ₦500,000
Taxable profit: ₦3,600,000 − ₦2,160,000 = ₦1,440,000
Tax: First ₦800K at 0% = ₦0. Next ₦640K at 15% = ₦96,000
Annual tax: ₦96,000 (₦8,000/month)
Content Creators (YouTube, TikTok, Instagram)
Your revenue includes: AdSense payments, sponsorship deals, affiliate commissions, product sales, and platform creator funds. Deduct: camera equipment, editing software, internet costs, lighting, studio/recording space, travel for content, and any team payments.
Freelancers on Upwork/Fiverr
Your revenue is what hits your account after platform fees. Deduct: equipment, software, workspace, internet, professional development, and any subcontractor costs. Note: the platform fee itself is already deducted from what you receive, so your revenue figure is already net of that.
Market Traders and Online Sellers
Your revenue is total sales. Deduct: cost of goods purchased for resale, shop rent, transport/logistics, packaging, and marketplace fees. Your taxable profit is what's left after these legitimate business costs.
Common Mistakes Self-Employed People Make
1. Not Keeping Records
The biggest one. If you can't prove your expenses, you can't deduct them. That means you get taxed on your full revenue instead of your profit. The difference can be enormous.
Solution: Keep a simple spreadsheet. Record every business expense with the date, amount, and category. Save receipts (photos are fine). This takes 5 minutes a day and saves you thousands at tax time.
2. Mixing Personal and Business Expenses
If everything goes through one bank account, it's harder to prove what's business and what's personal. Consider a separate account (or at minimum, clear categorisation) for business transactions.
3. Waiting Until You Need a TCC
Classic scenario: you need a visa or a contract, and suddenly you discover you need 3 years of filed returns. Now you're back-filing in a panic, paying penalties, and scrambling for old records.
File every year. Even if you owe ₦0. Build the habit now.
4. Thinking "Small Amounts Don't Count"
₦50,000 from a client here, ₦30,000 there — it adds up. The tax authority doesn't care about individual payments. They care about total annual income. If your total annual profit exceeds ₦800,000, you owe tax on the excess.
5. Ignoring Withholding Tax Credits
Some clients — especially corporate ones — deduct Withholding Tax (usually 5% or 10%) before paying you. You should receive a WHT credit note. This amount is a credit against your annual tax liability. If you don't track these, you might end up paying tax twice on the same income.
Filing Electronically
As at the time of writing, most State IRS portals accept electronic filing. Lagos uses eTax, FCT has its own portal, and other states have varying levels of electronic filing capability. Check your specific state's IRS website for their filing process.
Electronic filing is faster, creates a clear record, and makes it easier to apply for a TCC later. Where available, always prefer electronic over paper filing.
What If You Have Both Employment Income AND Self-Employment Income?
If you work a 9-to-5 (with PAYE being deducted) AND have a side hustle, you need to declare everything on your annual return:
- Your employment income (where PAYE was deducted)
- Your self-employment profit (revenue minus expenses)
- Total income = both combined
- Tax is calculated on the total, with PAYE already deducted credited against the liability
You only owe additional tax on the self-employment portion that wasn't already covered by PAYE.
Self-employed and confused about tax?
Taxly helps freelancers, content creators, and independent workers organize their income, calculate deductions, and file on time. No accounting degree needed.
File as self-employed with Taxly →Quick Checklist for Self-Employed Nigerians
| Task | Frequency | Why |
|---|---|---|
| Track all business income | Daily/weekly | Know your revenue |
| Record business expenses with receipts | As they occur | Reduce taxable profit |
| Calculate quarterly profit estimate | Every 3 months | No surprises at year-end |
| Set aside money for tax | Monthly | Don't get caught without funds |
| File PIT return | Annually (by 31 March) | Legal requirement + TCC eligibility |
| Keep records for 6 years | Ongoing | Tax authority can audit within this period |
Bottom Line
Being self-employed in Nigeria comes with freedom — but also with tax responsibility that nobody handles for you. The good news is the system is fair: you're taxed on profit, not revenue. The ₦800K threshold protects smaller earners. And legitimate business expenses significantly reduce what you owe.
The key is record-keeping. Track your income. Track your expenses. File every year. And if your profit is under ₦800,000, you still file — you just owe nothing. That filed return is your ticket to a Tax Clearance Certificate, which opens doors to visas, contracts, and loans.
Don't be the freelancer who earns ₦5 million a year but can't get a visa because they never filed. Start now.