Salaried workers earning more than KSh32,333 per month are set to receive an additional KSh2,083 in monthly take-home pay under proposed changes to Kenya’s Pay As You Earn (PAYE) tax system, as the National Treasury moves to extend tax relief beyond low-income earners.
The revised proposal will make the first KSh32,333 of monthly employment income tax-free for all salaried workers, including those earning higher salaries. This represents a significant adjustment from the initial plan, which focused on exempting only employees earning at or below the threshold.
National Treasury Cabinet Secretary John Mbadi told the Business Daily that the government had approved the proposal for submission to Parliament, with the amendments expected to be tabled next week.
Under the proposed structure, the existing 10 percent and 25 percent tax bands will be scrapped alongside the monthly personal relief of KSh2,400. The first KSh32,333 will instead attract a zero per cent tax rate, while income above that amount will continue to be taxed progressively.
Treasury estimates indicate that employees earning KSh50,000 monthly would see their take-home pay increase to KSh41,112 from the current KSh39,029. Those earning KSh100,000 would receive approximately KSh72,574, compared with KSh70,441 under the existing system.
The revised arrangement is expected to benefit approximately 3.46 million salaried workers, with 1.77 million continuing to pay PAYE while receiving the same estimated monthly tax relief.
The government estimates that the changes will reduce payroll tax collections by approximately KSh3.7 billion every month, equivalent to KSh44.4 billion annually. Treasury expects the additional disposable income to stimulate household spending, support businesses, and encourage economic activity.
The proposal follows President William Ruto’s announcement during the 2026 Mashujaa Day celebrations that workers earning up to KSh32,333 should be exempted from PAYE.
However, the changes are not yet law. Parliament must consider and approve the proposed amendments before employers can implement the revised tax calculations.
Other statutory deductions, including National Social Security Fund contributions, Social Health Insurance Fund contributions, and the Affordable Housing Levy, will remain applicable.
If approved, the changes will represent a broader restructuring of personal income taxation, giving workers across different salary levels an estimated KSh2,083 monthly boost.
https://x.com/NationAfrica/status/2118324954458714513?a=pGT1LhdTHm1h0sKTk38&s=20
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