Treasury plans zero PAYE on pay up to KSh32,333 and scraps KSh2,400 relief

The National Treasury wants to stop taxing salaries of KSh32,333 a month or less, a change that would take about 362,000 more formal workers out of the PAYE net. To pay for it, the KSh2,400 personal relief that every employee gets today would be scrapped, so people earning above roughly KSh50,000 would pay slightly more.

Treasury Cabinet Secretary John Mbadi set out the figures on Thursday, October 22, and said the proposals would go to Parliament for approval next week. “We want to do away with this thing called the relief and set the PAYE rate at zero for earnings up to Sh32,333,” he said, as quoted by the Daily Nation. He added that the other tax bands would not change for now.

The plan firms up an idea floated earlier this month. On October 18, we reported that Mbadi was planning a PAYE exemption for low earners; the threshold now on the table is KSh32,333, not the KSh32,800 mentioned at the time.

Who pays less and who pays more

Today the first KSh24,000 of monthly pay is taxed at 10%, and every taxpayer then gets KSh2,400 of personal relief, which is why people on KSh24,000 or less pay no PAYE in practice. Under the proposal the relief disappears and a zero rate applies to the first KSh32,333 instead.

Treasury’s own estimates, reported by the Daily Nation, show how that plays out:

The number of formal workers who pay no income tax would rise from 1.32 million to 1.69 million. Those still paying would fall from 2.14 million to 1.77 million, about 51% of the 3,468,997 people in formal jobs.

The changes affect PAYE only. Deductions such as the Affordable Housing Levy, SHIF and NSSF are separate and would still come off payslips. You can see how each one is worked out in our PAYE tax bands and housing levy table.

A worked example

Take a worker earning KSh30,000 a month before deductions. Under today’s bands, the first KSh24,000 is taxed at 10% (KSh2,400) and the next KSh6,000 at 25% (KSh1,500), for KSh3,900 in tax before relief. Subtract the KSh2,400 personal relief and PAYE comes to about KSh1,500, before allowable deductions such as the housing levy and SHIF reduce the taxable figure. Under the proposal, that same KSh30,000 falls below the KSh32,333 zero-rate line, so PAYE would be nil. That is money back in the pocket every month for teachers’ aides, junior clerks, security guards and other workers in that band.

The picture flips higher up. Because the KSh2,400 relief is worth the same to everyone, scrapping it costs every taxpayer KSh2,400 a month. Low and middle earners win that back, and more, through the wider zero band; higher earners do not, which is why Treasury’s table shows bills rising from about KSh60,000 upwards.

Other measures in the package

Mbadi also proposed two changes aimed at households:

• No stamp duty on land and property deals worth less than KSh1 million, to support the affordable housing programme.
• Removing the 25% import duty on mobile phones, to bring down the cost of handsets.

What happens next

Nothing changes on payslips yet. The proposals need to pass Parliament first, and the effective date has not been announced. The Kenya Bankers Association, which estimates that workers have lost up to 12% of their purchasing power over five years because of taxes and statutory deductions, has asked for technical details before the bill reaches the National Assembly.

The timing is political as well as economic: the next General Election is in August 2027, and the government has faced strong pushback over tax rises since 2022. Business Radar will update this story when the bill is published.

Source: Daily Nation, “High earners set to pay more as 362,000 workers spared from taxes”, October 23, 2026, quoting National Treasury estimates.