By: Goodnews Dzramedo
Finance, Supply Chain and Total Rewards Professional
Executive Summary
The Income Tax (Amendment) Act, 2026 (Act 1178) provides targeted relief to individual taxpayers and broadens access to Ghana’s presumptive tax regime for small businesses. The Act increases the annual tax-free threshold for resident individuals from GH¢5,880 to GH¢7,056 and raises the presumptive tax turnover threshold from GH¢500,000 to GH¢750,000. These changes are expected to improve disposable income, reduce compliance pressure for qualifying SMEs, and support a simpler tax administration framework.
Key Takeaways
- The tax-free threshold has increased by 20%, providing relief to all resident individual taxpayers.
- Minimum wage earners are effectively removed from the personal income tax net.
- The top marginal tax rate remains 35% for annual income above GH¢600,000.
- More SMEs may now qualify for the 3% presumptive tax regime because the turnover threshold has increased to GH¢750,000.
- Small businesses must still keep proper sales records and retain withholding tax certificates to avoid double payment.
- Introduction
The Income Tax (Amendment) Act, 2026 (Act 1178), assented to on 26 August 2026, amends the Income Tax Act, 2015 (Act 896). The amendment updates the First Schedule, which governs the graduated tax rates for resident individuals, and the Second Schedule, which determines the turnover threshold for presumptive taxation.
- Revised Personal Income Tax Structure
The updated annual chargeable income bands for resident individuals are:
- First GH¢7,056 – Nil
- Next GH¢960 – 5%
iii. Next GH¢1,200 – 10%
- Next GH¢34,800 – 17.5%
- Next GH¢192,000 – 25%
- Next GH¢363,984 – 30%
vii. Exceeding GH¢600,000 – 35%
- Comparative Analysis with Previous Regime (Act 1111 of 2023)
| Band | Previous (2024) | New (Act 1178) | Change |
| Nil | GH¢5,880 | GH¢7,056 | +GH¢1,176 |
| 5% | GH¢1,320 | GH¢960 | -GH¢360 |
| 10% | GH¢1,560 | GH¢1,200 | -GH¢360 |
| 17.5% | GH¢38,000 | GH¢34,800 | -GH¢3,200 |
| 25% | GH¢192,000 | GH¢192,000 | Nil |
| 30% | GH¢366,240 | GH¢363,984 | -GH¢2,256 |
| 35% | >GH¢600,000 | >GH¢600,000 | Retained |
Annual Individual Tax Rates Comparison Table
- Impact by Taxpayer Category
- a) Low-Income Earners (≤ GH¢7,056 p.a.)
The tax-free threshold has increased from GH¢5,880 to GH¢7,056 per annum, equivalent to a monthly increase from GH¢490 to GH¢588. This 20% adjustment removes minimum wage earners from the tax net and aligns the threshold with the 2026 National Daily Minimum Wage of GH¢21.77. Consequently, every resident individual taxpayer benefits from at least GH¢117.60 in annual tax relief.
- b) Lower-Middle Income (GH¢7,057 – GH¢50,000 p.a.)
Although the 5%, 10%, and 17.5% bands have narrowed, taxpayers within this category still achieve net savings. For example, an employee with annual chargeable income of GH¢40,000 saves approximately GH¢250 under the revised structure. While the monthly impact is modest, it provides a positive improvement in disposable income and net take-home pay.
- c) Middle to Upper-Middle Income (GH¢50,001 – GH¢600,000 p.a.)
The 25% band remains applicable up to GH¢192,000. The increased tax-free threshold substantially offsets the narrower middle bands, producing estimated annual savings of GH¢300 to GH¢600 for taxpayers in this income range. Employers may communicate this as a modest but positive net-pay adjustment in Total Rewards and compensation discussions.
- d) High Income Earners (> GH¢600,000 p.a.)
The 35% top marginal rate continues to apply to annual chargeable income exceeding GH¢600,000, or GH¢50,000 per month. The rate has not increased, and the threshold has not been reduced. Therefore, any savings available to high-income earners arise only from the relief provided in the lower tax bands.
- Presumptive Tax Amendment
Act 1178 further amends paragraph 5 of the Second Schedule by raising the presumptive tax turnover threshold from GH¢500,000 to GH¢750,000.
A business with annual turnover above GH¢20,000 but not exceeding GH¢750,000 remains subject to tax at 3% of turnover on a modified cash basis.
The expanded threshold brings more small businesses within the simplified 3% tax regime. SMEs in trading, retail, and services with turnover between GH¢500,000 and GH¢750,000 may now benefit from simplified compliance and reduced administrative requirements.
In practical terms, the amendment makes tax compliance easier for many small business operators.
Old Law: Businesses with annual sales above GH¢20,000 and up to GH¢500,000 could pay simplified tax at 3% of sales.
New Law (Act 1178): The qualifying threshold is now GH¢750,000.
Businesses with annual sales between GH¢20,000 and GH¢750,000 may therefore qualify to pay 3% of turnover.
Businesses with annual turnover of GH¢20,000 or less generally fall under the presumptive tax based on instalment category, rather than the 3% turnover-based category. The Ghana Revenue Authority’s Modified Taxation Scheme describes this category as applying to businesses with average annual turnover not exceeding GH¢20,000 over three consecutive years. Accordingly, a business with turnover of GH¢20,000 or less would ordinarily not pay the 3% turnover tax; instead, it may be assessed under the instalment-based presumptive tax framework, subject to GRA classification and registration requirements.
- Presumptive Tax Explained for Small Business Owners
Turnover means the total money your business receives from sales during the year. It is not your profit. For example, if you sell provisions, spare parts, clothing, food, or provide services such as masonry, carpentry, sewing, hairdressing, or driving, your turnover is the total amount customers pay you.
Modified cash basis means GRA taxes the money you actually receive, whether in cash, by MoMo, or through a bank transfer. If a customer buys on credit and has not paid, that amount is not counted until payment is received.
- How to calculate the 3% tax:
Add up your annual sales, multiply the amount by 3, and divide the result by 100.
- Example 1: Provision Shop at Kaneshie
Auntie Ama’s total sales from January to December amount to GH¢100,000.
Her tax = 3% of GH¢100,000 = GH¢3,000 for the whole year.
This means she pays GH¢3,000 for the year, without preparing a complicated tax computation.
- Example 2: Spare Parts Dealer at Abossey Okai
Kofi’s total sales amount to GH¢600,000 for the year.
Old law: He did not qualify for the simplified 3% system and would have been required to follow the standard business tax regime, including more detailed accounting obligations.
New law: He now qualifies for the simplified 3% system.
His tax = 3% of GH¢600,000 = GH¢18,000 for the whole year.
- Who may qualify?
- Your annual sales are more than GH¢20,000 but not more than GH¢750,000.
- You operate as a sole proprietor, trader, artisan, or small service provider.
- You are not required to register for VAT.
- Main benefits for small businesses:
- Easy to understand: You do not need to calculate profit, expenses, rent, or deductions. The tax is simply 3% of sales.
- Potentially lower cost: For many small businesses, paying 3% of sales may be cheaper than paying tax on profit under the standard regime.
- Less paperwork: The system reduces the need for detailed accounts and may lower accounting costs.
- Practical steps for small business owners:
- Keep a simple sales book and record each sale every day.
- Add up your sales at the end of the year.
- If your sales fall between GH¢20,000 and GH¢750,000, visit the nearest GRA office and ask to be assessed under the 3% presumptive tax regime.
- Keep receipts and records for all sales.
This amendment is particularly relevant for micro and small businesses in commercial centres such as Makola, Kantamanto, Abossey Okai, and Kumasi Central Market, as it allows more operators to remain under the simplified tax system.
- Important Note for SMEs Supplying Companies and Institutions
Small businesses that supply goods or services to companies, schools, hospitals, or public institutions should note that withholding tax may still be deducted at the applicable rate.
- Goods: 3%
- Services: 7.5%
- Works: 5%
Example: If you supply stationery valued at GH¢10,000, the buyer pays you GH¢9,700 and gives you a withholding tax certificate for GH¢300.
What this means for businesses on the 3% presumptive tax regime:
- The deduction still applies, so the supplier receives less cash upfront.
- The deduction is not an additional tax. It is treated as a tax credit. For example, if the annual 3% presumptive tax is GH¢3,000 and the business holds withholding tax certificates worth GH¢1,000, only the GH¢2,000 balance is payable to GRA.
- If certificates are misplaced or returns are not properly filed, the business may effectively pay tax twice.
- Payment under the 3% presumptive tax regime does not automatically exempt a business from withholding tax deductions. Only an exemption letter from the Commissioner-General can stop the deduction.
Practical advice: Keep every withholding tax certificate. Where several customers deduct withholding tax, the business may already have prepaid a substantial portion of its presumptive tax liability. All certificates should be submitted at year end.
- Conclusion and Recommendations
Act 1178 is a relief-focused amendment with clear implications for employees, employers, and small businesses. By increasing the tax-free threshold, the Act provides measurable relief to resident individual taxpayers while preserving the existing top marginal rate structure. By expanding the presumptive tax threshold to GH¢750,000, it also brings more SMEs within a simplified tax framework. Employers should update PAYE computation tables in line with the revised First Schedule. Qualifying SMEs should also review their turnover, strengthen record-keeping, and confirm their eligibility for the expanded presumptive tax regime.
References:
Income Tax (Amendment) Act, 2026 (Act 1178)
Income Tax (Amendment) Act, 2023 (Act 1111)
First Schedule of Income Tax Act, 2015 (Act 896), as amended
Second Schedule of Income Tax Act, 2015 (Act 896), as amended
Section 7 of Income Tax Act, 2015 (Act 896), as amended
https://gra.gov.gh/domestic-tax/tax-types/individual/modified-taxation-scheme/
https://www.glmis.gov.gh/
