Your business had a fantastic year in 2024. You made more money than you expected, reinvested wisely, and closed December feeling genuinely good about where things stood. Then your accountant sits you down in early 2025 and says, “We need to talk about your 2024 tax.”

The tax you’re paying in 2025 might actually be based on your 2023 numbers. Not 2024. 2023.

This is one of the most misunderstood parts of how business tax works in Nigeria. The Nigeria Tax Act, 2025 lays it out precisely, once you know how to read it.

The Basic Rule: The Taxman Is Always Looking Backwards

Under the Act, each year of assessment generally uses profits from the accounting period that immediately preceded it.

In plain English, when the tax authority calculates what you owe this year, it is looking at what your business earned last year. Not this one. Last one.

Scenario: If your business runs on a January to December accounting year, your 2025 tax assessment uses the profits from your December 2024 accounts. Your 2025 earnings won’t enter the picture until your 2026 assessment.

Knowing which year of assessment your income belongs to is the foundation of your entire tax position, and it matters more than most people realise.

Brand New Business? The Rules Shift a Little

If you’re just starting out, you don’t have a “last year” yet, so the framework adjusts.

For a brand new business, the first year of assessment covers the profits earned from the date you actually started operating through to the end of your first full accounting period. The law gives new ventures a clear starting point. They do not need to follow a framework designed for established businesses.

Scenario: You launched on 1 April 2024, and your accounting year runs to 31 December. Your first assessment covers those nine months, April to December 2024.

Changing Your Accounting Date? The Taxman Needs to Know

Maybe you originally closed your accounts in March, but your industry now runs on a December cycle and switching makes more operational sense. The Act allows you to change your accounting date, but it does not let you do it quietly.

When a business changes its accounting date, the basis period for that tax year stretches from the day after the previous period ended all the way to your new chosen accounting date. From that point forward, all future assessments follow the new rhythm.

The catch? You must notify the relevant tax authority at least thirty days before the normal deadline for filing your income tax returns. You cannot simply switch dates and hope nobody notices. The law expects advance notice, and that expectation is not negotiable.

When the Business Closes: The Final Chapter

Every business eventually closes, through retirement, a strategic pivot, or simply reaching the natural end of its road. The Act handles this clearly and practically.

When your trade or business permanently ceases operations, your final assessable profit covers the period from the start of that accounting period to the actual date of closure. You must pay any tax on that final profit within six months of closing the business.

But what about money that keeps moving after you have technically closed? The Act anticipated exactly this. The Act assigns receipts and payments after closure to the last day before the business ceased. This also covers payments a liquidator handles while winding down the business. You then have one month to report it to the tax authority.

No loose ends. No grey areas. The law ties everything off cleanly.

What If the Business Owner Passes Away?

If the person running the business dies, their personal representative (an executor or estate administrator) may still receive or make payments on behalf of that business. For tax purposes, the Act assigns those receipts and payments to the day before the person’s death.

It is a small but genuinely meaningful provision, ensuring that tax timing does not pile additional complexity onto what is already an incredibly difficult period for families and estates. The law thought about this, and that is worth noticing.

When Change Doesn’t Mean Starting Over

If your personal circumstances shift significantly, does the taxman treat your existing business as though it just launched? Not always. This distinction genuinely matters.

Moving from one country of residence to another does not count as ceasing your business and starting a new one. Joining or leaving a partnership also does not automatically trigger a fresh start, as long as the nature of the trade carried on by that partnership remains essentially the same before and after the change.

This protection stops the tax authority from treating an unchanged trade as a brand new business. A shift in your personal situation does not reset the clock on what you built.

A Note on Employment Income and Year of Assessment

For those in employment rather than running a business, the timing rules work slightly differently.

For tax purposes, your regular salary arises day by day as you work.

Bonuses and commissions, however, work differently. These one-off payments count as income on the day your employer pays you. If they arrive after you have already left the job, the law counts them as income on your last day of employment, not the date you physically received the money. So, suppose your former employer pays a commission three months after you resign. The law still links it to your last working day.

Why the Year of Assessment Matters to You

Whether you run a business, draw a salary, or manage both at once, these timing rules determine exactly which year of assessment your income gets taxed in. Getting it wrong means overpaying, underpaying, or walking into a conversation with the tax authority that nobody wants to have.

You do not need to be an accountant to understand when income counts. It is foundational knowledge for anyone who earns money in Nigeria, and now you have it. For related context, see our earlier posts on the Nigeria Tax Act 2025, disallowed business expenses, and how company profits get taxed.

Share this with a fellow business owner or employed friend who could use it. Knowing the rules is exactly how you stop getting caught off-guard at tax time.

Feeling overwhelmed?

We know the terminology can feel dense, and it’s easy to read something like this and still not be sure where your own situation lands. If you’d like to talk it through, someone on our team would be genuinely happy to sit with you. Book a consultation and we’ll go through your specific circumstances, what applies to you, and what your next step looks like.

Schedule a consultation →