Kenya plans zero PAYE on monthly income up to KSh 32,333; 362,846 more formal workers to be exempt

Kenya's Treasury plans to set the Pay As You Earn (PAYE) income tax rate at zero on monthly income up to KSh 32,333, up from KSh 24,000 now, and to scrap the KSh 2,400 monthly personal relief given to every taxpayer. Cabinet Secretary for the National Treasury and Economic Planning John Mbadi gave the details on 22 October, and Business Daily reported that 362,846 more formal-sector workers would pay no income tax. "We want to do away with this thing called the relief," Mbadi said, as quoted by the paper.

Under the current rules, the first KSh 24,000 of monthly income is taxed at 10 per cent, which the KSh 2,400 relief cancels out. Income from KSh 24,001 to KSh 32,333 is taxed at 25 per cent. The 30 per cent rate applies up to KSh 500,000, 32.5 per cent from KSh 500,000 to KSh 800,000 and 35 per cent above that. Mbadi said the Treasury might not change the other bands at this point.

Mbadi said a worker earning KSh 32,333 a month would keep an extra KSh 2,083, Pulse Kenya reported. He put the number of formal-sector employees at 3,468,997, of whom 1,328,625 are already exempt. The change would raise the exempt group to about 1.69 million.

Business Daily also cited 2024 figures from the Kenya National Bureau of Statistics (KNBS) Statistical Abstract: of 3.21 million formal-sector employees, 1.36 million, or 42.2 per cent, earned below KSh 50,000 a month, and 397,541, or 12 per cent, earned above KSh 100,000.

President William Ruto announced the KSh 32,333 threshold on 20 October at the Mashujaa Day celebrations at Kipchoge Keino Stadium in Eldoret, Citizen Digital reported. He also proposed exempting land transactions valued at KSh 1 million or less from stamp duty and removing the 25 per cent import duty on mobile phones.

Ruto told the Treasury to take the proposals to Parliament the following week. Mbadi and Kuria Kimani, chair of the National Assembly's Finance and National Planning Committee, said a Bill to give effect to the changes would reach the House in the week beginning 26 October. No date has been given for the changes to take effect, and they become law only if Parliament passes them.