Earlier in 2026, a PAYE restructuring was floated publicly — a proposal to exempt the first KES 30,000 of monthly income from tax entirely, with graduated rates above that. Several professional and industry bodies, including ICPAK and the Kenya Bankers Association, submitted formal proposals along similar lines during the Finance Bill 2026 public participation process — variations included raising the tax-free threshold, widening the bands, and reducing the top marginal rate from 35% toward 28-30%.
None of these proposals were adopted. The Finance Act 2026, assented to in June 2026, left the PAYE bands unchanged from the structure introduced under the Finance Act 2023.
What’s actually in effect right now
| Monthly Taxable Income | Rate |
|---|---|
| First KES 24,000 | 10% |
| 24,001 – 32,333 | 25% |
| 32,334 – 500,000 | 30% |
| 500,001 – 800,000 | 32.5% |
| Above 800,000 | 35% |
Monthly personal relief remains KES 2,400. A proposal to raise this to 3,000 — which would have effectively pushed the tax-free threshold toward 30,000 — was also not adopted. An employee earning 30,000 a month is taxed from the first shilling under the current structure, the same as before the earlier proposals were floated.
What else changed in the Finance Act 2026
The Act’s changes were concentrated elsewhere — broader withholding tax definitions that now capture digital payment platforms and payment-processing fees, and a new provision allowing KRA to recover unpaid fees and levies using the same mechanisms as unpaid tax. Nothing in the Act altered how PAYE is calculated on an individual payslip.
Could this change later?
Parliament’s Finance and National Planning Committee recommended that Treasury undertake a broader, comprehensive review of the PAYE structure, rather than adopting the narrower proposals submitted during this cycle. That recommendation hasn’t translated into a published bill or a confirmed timeline as of now. Until a specific bill with specific figures is tabled, the bands above remain the ones in force, and any payroll planning should proceed on that basis.
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