Self-Employment Tax Guide: Freelancers & Contractors

The gig economy is booming in Nigeria, with millions of freelancers, consultants, and independent contractors earning income outside traditional employment. However, many self-employed individuals are unclear about their tax obligations.

Are You Self-Employed?

You're considered self-employed if you earn income from:

• Freelance work (writing, design, programming, etc.)
• Consulting or professional services
• Ride-hailing (Uber, Bolt, Taxify)
• Online businesses or e-commerce
• Independent contracting
• Gig economy platforms

Tax Obligations for Self-Employed Nigerians

1. Register for Tax

Get Your TIN (Tax Identification Number):

• Visit FIRS office or register online at www.firs.gov.ng
• Provide valid ID and proof of address
• TIN is issued within 24-48 hours
• No cost to register

2. Determine Your Tax Rate

Self-employed individuals pay tax based on annual profits:

For Annual Profits:

• Up to ₦300,000: 7%
• ₦300,001 - ₦600,000: 11%
• ₦600,001 - ₦1,100,000: 15%
• ₦1,100,001 - ₦1,600,000: 19%
• ₦1,600,001 - ₦3,200,000: 21%
• Above ₦3,200,000: 24%

3. Pay Estimated Tax Quarterly

Unlike employees with PAYE deductions, self-employed individuals must pay estimated tax quarterly:

Payment Deadlines:

• Q1 (Jan-Mar): Pay by April 30
• Q2 (Apr-Jun): Pay by July 31
• Q3 (Jul-Sep): Pay by October 31
• Q4 (Oct-Dec): Pay by January 31 of following year

4. File Annual Tax Returns

Submit annual tax returns by March 31 of the following year, showing:

• Total income from all sources
• Business expenses
• Net profit
• Tax paid quarterly
• Any balance due or refund owed

Allowable Business Deductions

Reduce your taxable income by claiming these common business expenses:

Office & Equipment

• Rent for dedicated office space
• Computer and equipment purchases
• Software subscriptions
• Internet and phone bills (business portion)

Professional Services

• Accounting and bookkeeping fees
• Legal fees
• Professional membership dues
• Business consulting

Marketing & Advertising

• Website hosting and domain
• Social media advertising
• Business cards and marketing materials
• Networking event costs

Travel & Transportation

• Business-related travel expenses
• Fuel for business purposes (keep logbook)
• Vehicle maintenance (proportional to business use)
• Public transportation for client meetings

Other Deductible Expenses

• Training and professional development
• Office supplies and stationery
• Bank charges on business accounts
• Insurance premiums (business-related)

Record-Keeping Requirements

Essential Records to Maintain:

Income Records:

• Invoices issued to clients
• Payment receipts
• Bank statements
• Contract agreements

Expense Records:

• All business receipts
• Bank/credit card statements
• Mileage logs for vehicle use
• Home office usage documentation

Tax Records:

• Quarterly tax payment receipts
• Annual tax returns filed
• TIN certificate
• Correspondence with FIRS

How Long to Keep Records: Minimum 6 years from the tax year

Common Mistakes to Avoid

1. Mixing Personal and Business Finances

Problem: Makes tracking income/expenses difficult and raises audit red flags Solution: Open separate business bank account and credit card

2. Not Keeping Receipts

Problem: Can't claim deductions without proof Solution: Use expense tracking apps (e.g., Zoho Expense, QuickBooks)

3. Missing Quarterly Payments

Problem: 10% penalty + interest on late payments Solution: Set calendar reminders for quarterly deadlines

4. Claiming Personal Expenses

Problem: Risk of audit and penalties Solution: Only claim expenses "wholly and exclusively" for business

5. Not Filing When Income is Low

Problem: Penalties apply even if you owe no tax Solution: File returns every year, even with zero income

Tax Planning Strategies

Maximize Deductions

• Track EVERY business expense
• Claim home office deduction (proportional to space used)
• Deduct health insurance premiums
• Claim pension contributions (even voluntary ones)

Income Timing

• Consider deferring income to following year if you're close to a higher tax bracket
• Accelerate expenses into current year to reduce taxable income

Incorporate Your Business

If earning over ₦2-3M annually, consider incorporating:

• Company Income Tax (CIT) rate: 30% flat (vs up to 24% personal + additional charges)
• Better for businesses making ₦5M+ profit annually
• Allows business expense deductions
• Easier to raise capital and get contracts

Getting Help

When to Hire an Accountant:

• Annual income exceeds ₦3,000,000
• Multiple income streams
• Complex business structure
• Lacking time or expertise
• Planning to incorporate

DIY Tax Filing

For simpler situations:

• Use our Tax Calculators
• Download FIRS tax forms
• Consult our AI Tax Assistant
• Join online tax communities

Key Takeaways

1. Register immediately: Get your TIN as soon as you start earning
2. Pay quarterly: Don't wait until year-end to pay taxes
3. Keep meticulous records: Save every receipt and invoice
4. Claim all deductions: Reduce taxable income legally
5. File on time: Avoid penalties and interest
6. Plan ahead: Estimate taxes and set aside funds monthly
7. Seek help when needed: Professional advice can save more than it costs

Next Steps

1. Register for TIN if you haven't already
2. Open business bank account to separate finances
3. Set up record-keeping system (app or spreadsheet)
4. Calculate estimated quarterly tax using our calculator
5. Mark tax deadlines in your calendar
6. Review expenses monthly to track deductions

Need personalized guidance? Our AI Tax Assistant can answer specific questions about your self-employment tax situation. Chat now →