Proposed PAYE Changes to Boost Take-Home Pay for Low-Income Earners

Salaried workers who earn under Sh50,000 per month could be getting a pay rise, thanks to proposed changes to Kenya’s income tax brackets. The changes, included in a draft Tax Laws Amendment Bill, are being fronted as a way to ease the tax burden on low-income earners and allow them to go home with more disposable cash in their pockets.

Treasury boss John Mbadi says the idea aims to lift the tax-free income threshold from Sh24,000 to Sh30,000. If it gets the go-ahead, workers earning up to Sh30,000 will no longer have to pay Pay As You Earn (PAYE). On top of that, income between Sh30,000 and Sh50,000 will be taxed at a lower rate of 25 percent.

Right now, income above Sh32,333 is taxed at rates ranging from 30 to 35 percent - and that’s a system, economists say, is putting too much pressure on lower and middle-income earners.

What Will Workers Be Saving?

The proposed changes could add up to a pretty penny in monthly savings:

• A worker on Sh30,000 salary would take home an extra Sh731, leaving them with around Sh26,925.

• Those earning Sh35,000 would see a gain of around Sh1,500, as their PAYE bill gets significantly lower.

• Employees on Sh50,000 would get a boost of approximately Sh2,127, taking their net pay to around Sh41,156.

These figures already factor in the higher NSSF contributions which come in next month.

When & Why is This Happening?

The tax relief plan comes just as the government is heading into its last full year before the 2027 election. Since President William Ruto’s administration came into power in 2022, the administration introduced new taxes and hiked existing ones, and the public has been getting increasingly fed up with the rising cost of living.

The Treasury says it'll be presenting the amendment Bill in front of parliament next week but there’s no word yet on what might happen to workers on higher salaries, who are taxed at rates between 30 and 35 percent.

Who Could Benefit?

Official numbers show that over 1.36 million Kenyans took home less than Sh50,000 in 2024 - that’s 42.2 percent of the formal workforce. So nearly half of salaried workers could be in line for some tax relief.

In a separate development, the World Bank is urging the government to exempt low-income earners from the housing levy and the Social Health Insurance Fund (SHIF) deduction, arguing that these levies are just adding to the problem of workers having too little take-home pay.

As parliament debates the proposals, many Kenyans will be keeping a very close eye on proceedings, hoping that the changes will finally bring some much-needed relief in a really tough economic climate.