Nobody runs payroll for a freelancer. That means nobody deducts your tax, nobody files for you, and the first sign that something was missed is a letter from the LIRS estimating what you owe. This guide is how to avoid the letter.
Who you pay
If you live in Lagos, your income tax goes to the Lagos State Internal Revenue Service, whatever state or country your clients are in. Income from working for yourself is taxed on the same bands as a salary, under the Nigeria Tax Act 2025, after deducting the expenses of earning it.
Get a tax identification number first
Clients that are companies will ask for your tax identification number before they pay you, and a bank will ask for it on a business account. As an individual you get it from the LIRS, using your NIN. If you registered a business name with the CAC, a number is issued with it.
Withholding tax: why you were paid less than you invoiced
A company paying you for professional or consultancy services deducts 5% of your fee and pays it to the tax authority on your behalf. On goods it is 2%. The rates are set by the Deduction of Tax at Source (Withholding) Regulations 2024.
That deduction is not a cost. It is your own income tax, paid early, and it counts against your bill when you file — but only if you can show it was withheld. Ask each client for the receipt or credit note for the deduction when they pay you, and keep them together. A credit you cannot prove is money you have lost.
Tax withheld from an individual living in Lagos belongs to the LIRS. A client that pays yours to the federal NRS instead has not lost it for you, but getting it credited will take letters.
A small supplier with a tax ID is not withheld from where its dealings with that client come to no more than ₦2,000,000 in a month.
VAT
Most freelancers will not need to charge it. A business with turnover of ₦100,000,000 a year or less need not. Above that, you register with the NRS and add 7.5% to your invoices — and withholding tax is still worked out on your fee before the VAT.
The annual return
Each year you file a self-assessment return with the LIRS for the year before, by 31 March. It is done on the LIRS’s online portal. You declare what you earned, deduct your business expenses and the reliefs a salaried worker gets — pension contributions if you make them, rent relief — work out the tax on the bands, and subtract every withholding tax credit you can prove.
If you file nothing, the LIRS can assess you on what it thinks you earned. That estimate is not designed to be generous, and disputing it is harder than filing would have been.
Records worth keeping
A spreadsheet and a folder are enough. The point is to be able to answer “how did you arrive at this figure?” without guessing.
Foreign clients
Being paid from abroad does not take the income outside Lagos tax: you are taxed where you live, not where your client is. Foreign clients will not withhold Nigerian tax, so nothing has been paid early and the whole bill falls due when you file. Set some aside from every payment.
How the money arrives matters too. A payment into a domiciliary account stays in dollars; a payment through a transfer service may be converted to naira on the way in, at the service’s rate. Read the terms before you choose.