The 34% Mistake: Why Freelancers Are About to Lose Millions to the NRS.

Important Disclaimer

Before we dive in, I want to make one thing clear.

I am a builder of systems. I have always championed the Limited Liability Company (LLC) structure as a vehicle for global credibility, trust, and scalability. If your goal is to build a global institution, that structure is still vital.

However, the opinions and insights in this article are strictly based on the financial implications of the new Nigeria Tax Act (NTA) 2025. I am sharing this angle solely to educate you on the tax realities and immediate costs of this new law. Read this as a guide to your tax efficiency, not as a command to shrink your global vision.

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The Trap You Didn’t See Coming

I want to look you in the eye and ask you a serious question.

Do you think you are playing the game, or is the game playing you?

For years, the “smart” advice in the Nigerian business space was simple: “Go and register a Limited Liability Company (LLC). As long as you make less than ₦25 million, you pay zero tax.”

It sounded perfect. It was the easy way out. It looked like the “smart” move.

But I have learned from my own journey that what looks like the “smart” move today can be the very thing that traps you tomorrow. I remember when I was working at a gas station years ago. I had the title of “Manager.” It sounded prestigious to my peers. But the reality? I was working from 7 AM to 7 PM, lifting heavy cylinders, and taking home just 13,000 Naira a month.

The title was “Manager,” but the reality was suffering.

Just in case you already have plans to register an LLC, or perhaps you have already done so because you want the “title” of a Company Director, I need you to pause. Under the new Nigeria Tax Act (NTA) 2025, signed by President Bola Ahmed Tinubu, that title might just become a financial burden you didn’t bargain for.

The Federal Inland Revenue Service (FIRS) is transforming into the Nigeria Revenue Service (NRS). They are not joking. They are armed with data, tracking your crypto wallets, your bank inflows, and your digital footprints.

Whether you are a freelancer, a digital marketer, a developer, or a consultant—and regardless of whether you currently have an LLC or are just considering one—you need to know that the rules of the game have changed. If you are not careful, you might be walking into a financial slaughterhouse from January 1st of 2026 onward.

I have trekked 2 kilometers just to access electricity to work, so I know how hard you fight for every Naira. I will not sit back and watch you lose it to ignorance.

Sit down. Let’s look at this together.

The “Small Company” Trap (Why Your LLC Might Betray You)

Under the old rules, if your company turnover was small (under ₦25 million), the government said, “Keep your money, grow your business.” You paid 0% Company Income Tax (CIT), except for the tax filing, which is just a token.

The new law says, “We are raising that exemption to ₦50 million.”

You might be smiling right now, thinking this favors you. But stop for a second. There is a trap door here.

The new law introduces something called the “Professional Services Exclusion.”

It simply means this: If you sell your brain—if you are a consultant, a digital marketer, a software developer, a lawyer, or an accountant—the government says you are NOT a “Small Company,” no matter how little you earn.

Here is the Reality Check:

• The Old Way: A freelance designer registers an LLC. They earn ₦15 Million. They pay 0% tax. Life is good.
• The New Way (2026): That same designer has the same LLC. But now, the NRS classifies them as a “Professional Service.” They lose the exemption. They must now pay 30% Corporate Tax plus a 4% Development Levy.

That is a 34% tax bill on your profits. Just because you registered an LLC.

This reminds me of the time I had to choose between a high-paying job at a JAMB center and a low-paying internship. The JAMB job looked better on paper (like the LLC), but the internship had the long-term value. In this tax case, the “lesser” structure (Business Name) might actually hold more value for you right now than the “prestigious” LLC.

My Strategic Advice: If you sell skills rather than physical goods (like wigs or shoes), rushing to register an LLC might no longer be a badge of honor. It could be a liability. Depending on your long-term goals, you might be safer registering as a simple Business Name (Enterprise) for now.

A Silver Lining: Relief for the “Room and Parlor” Hustler

I remember vividly when I finally moved my family from a cramped single room to a “Room and Parlor Self-Contain.” The relief of having that space was immense, but the rent felt heavy on our shoulders.

If you operate as a Business Name or a freelancer (Sole Proprietor), you pay Personal Income Tax (PIT). The old rates were harsh. But the NTA 2025 actually gives a break here that I wish existed back when I was struggling with rent.

They have introduced a Rent Relief.

You can now deduct 20% of your annual rent (capped at ₦500,000) from your taxable income. Plus, the first ₦800,000 you make is completely tax-free.

This is a win for the middle class. It recognizes that before you can pay tax, you must have a roof over your head.

The Crypto Shock: No More Hiding in the Blockchain

Listen to me closely. The era of “flying under the radar” is dead.

If you are trading Crypto or Forex, do not make the mistake of opening an LLC to do it, thinking it makes you look “legit.”

• The Mistake: You trade through a company. Your gains are taxed at the corporate rate of 30%.
• The Strategy: You trade as an individual. Your Capital Gains are taxed at your personal marginal rate, which caps at 25% (and is often much lower for average earners).

Plus, you avoid the headache and cost of company audits. Don’t complicate your life just to look professional. Simplicity is the ultimate sophistication.

Let’s Play a Game: Tunde vs. Ngozi

I want to make sure you really get this. Let’s look at two typical business owners so you can see where you fit.

Case A: Tunde the Digital Consultant

• Business: Digital Marketing Agency.
• Annual Profit: ₦10 Million.
• Scenario 1 (He is an LLC): He is a “Professional Service.” He pays roughly ₦3.4 Million in Corporate Taxes.
• Scenario 2 (He is a Business Name): He pays Personal Income Tax. After his exemptions and Rent Relief, he pays roughly ₦1.5 Million.
• The Verdict: Tunde saves nearly ₦2 million just by NOT being an LLC.

Case B: Ngozi the Vendor

• Business: Sells Wigs and Shoes (Physical Goods).
• Annual Profit: ₦10 Million (Turnover ₦40M).
• Scenario: She is NOT a professional service. Her turnover is under ₦50M. She qualifies as a Small Company.
• Tax: 0% CIT.
• The Verdict: Ngozi should definitely register as an LLC.

Do you see the difference? One size does not fit all. You need a strategy that fits your reality.

What You Must Do Before January 1, 2026

I built Gownex Technology on the principle of looking ahead. I don’t want you to panic; I want you to prepare.

Here is your homework:

1. Audit Your Structure: If you are a service provider (dev, marketer, consultant), ask yourself: Is my LLC protecting me, or is it about to eat 34% of my lunch? It might be time to downgrade to a Business Name or restructure.
2. Separate Your Accounts: The NRS will be tracking bank inflows via your BVN and NIN. If you are mixing personal money with business money, you are digging your own grave. Stop it today.
3. Get Professional Help: The difference between “Professional Service” and “Trading” can be very slim. How you describe your business to the CAC matters.

Do not navigate this minefield alone. You have worked too hard to build your business to lose it to a tax error.

I know this is a lot to digest. But remember, the goal isn’t just to make money; it’s to keep it and grow it so we can build the world we dream of.

I can’t wait to see you at the top. Cheers to the growth ahead.

Samuel Olumuyiwa #ThePrincipal

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