President William Ruto has explained how teachers and other salaried workers could take home more money under proposed changes to the Pay As You Earn (PAYE) tax system, despite continuing to pay the Affordable Housing Levy.
Speaking during the official opening of the Kenya Comprehensive School Heads Association (KECSHA) meeting in Mombasa on Thursday, November 12, 2026, the President defended the housing levy while outlining the financial benefits of the planned tax adjustments.
Ruto said the government intends to increase the monthly income exempted from PAYE taxation from the current KSh24,000 to KSh32,000, meaning workers would pay no income tax on the first KSh32,000 they earn.
According to the President, the proposed adjustment would provide an additional KSh8,000 in tax-free income, translating into monthly savings of KSh2,000 for employees taxed at the 25 per cent rate.
To illustrate the impact, Ruto used the example of a teacher earning KSh50,000 per month.
Under the example, the teacher would contribute KSh750 towards the Affordable Housing Levy, which is calculated at 1.5 per cent of gross salary. However, the proposed PAYE reduction would save the same employee KSh2,000 in monthly taxes.
"So we are saying, you are not going to pay KSh2,000 from your salary, so the KSh750 that you pay, I have returned to you KSh2,000. So the difference is KSh1,250," Ruto explained.
The President argued that the proposed tax relief would leave the employee with an additional KSh1,250 after accounting for the housing levy contribution.
He also dismissed criticism surrounding the housing levy, saying the programme had generated employment and supported the construction of affordable homes, markets and student accommodation facilities.
Ruto disclosed that approximately 1.1 million people were working under the housing programme, while contracts covering houses, markets and student hostels had reached KSh1.2 trillion.
He further revealed that accommodation facilities with a combined capacity of more than 180,000 learners were under construction across the country.
The proposed tax adjustments form part of a wider government plan to raise the monthly tax-free income threshold to KSh32,333 while abolishing the existing KSh2,400 personal relief.
However, the proposed changes have not yet taken effect, meaning workers will continue operating under the existing PAYE structure until the new arrangements are implemented.
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