Banks call for raising minimum taxable income to KSh 30,000 in tax reform push

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Kenyan banks want the government to raise the minimum taxable monthly income from KSh 24,000 to KSh 30,000 and cap the top Pay As You Earn (PAYE) rate at 30%, arguing that lighter taxes on salaried workers would revive spending and help the economy. The proposal was made by the Kenya Bankers Association (KBA) in submissions to the National Treasury, which had invited comments on tax policy to shape the Finance Bill 2026.

What the banks are proposing

Under the KBA plan, monthly income would be taxed in these bands:

The current rates under the Finance Act 2023 are 10% on the first KSh 24,000, 25% on the next KSh 8,333, 30% on the next KSh 467,667, 32.5% on the next KSh 300,000 and 35% on income above KSh 800,000. Some reports of the proposal also said the bankers want monthly personal relief raised from KSh 2,400 to KSh 3,000.

Why the banks say taxes should come down

KBA argues that salaried Kenyans have lost much of their spending power. Besides PAYE, workers now pay the 1.5% Affordable Housing Levy, the 2.75% Social Health Insurance Fund contribution and rising National Social Security Fund contributions. Citing the Parliamentary Budget Office’s 2025 report, KBA said real wages had fallen by 10.7%.

“The purchasing power of salaried Kenyans has fallen significantly in recent years. Adjusting PAYE bands is a practical step to restore household income, stimulate spending, and support businesses,” said KBA chief executive Raimond Molenje.

Molenje added that when workers take home more pay, they spend, save and invest more. That, the association says, would strengthen the economy, improve loan repayment and eventually raise government revenue as consumption and investment grow, widening the tax base and offsetting the short-term loss in PAYE collections.

What it could mean for a payslip

Based on the two sets of bands, here is our estimate of monthly PAYE before personal relief and other statutory deductions:

The figures are illustrations only. The final effect on take-home pay would depend on the relief, the levies and the exact bands that the Treasury and Parliament adopt, if any.

Relief for businesses too

The ten-point proposal goes beyond PAYE. KBA also wants businesses to be allowed to remit withholding tax and withholding VAT by the fifth day of the month after the deduction. It says the change would cut compliance costs, improve cash flow and encourage small firms to formalise and use digital payments.

The association also says that easing the burden on lower and middle earners would put money directly into the economy through household spending, rather than relying mainly on public spending to drive growth. It describes the plan as a way to support workers, small businesses and lenders at the same time.

What happens next

The proposals are among submissions the Treasury is reviewing before it drafts the Finance Bill 2026. Any change to PAYE bands would need to be included in the bill and passed by Parliament before it could take effect. Until then, the current PAYE bands continue to apply to payslips.

To see how much tax you pay under the current bands, use our PAYE calculator or the Kiswahili kikokotoo cha PAYE. For a later Treasury proposal on low earners, see our report on plans for a PAYE exemption for workers earning KSh 32,800 or less.