How much extra cash Kenyans could take home if new PAYE proposal passes

Kenyans earning Sh30,000 or less could soon take home significantly more pay each month if a new tax proposal by the Treasury is approved by Parliament.

Treasury Cabinet Secretary John Mbadi has announced plans to exempt all employed Kenyans earning Sh30,000 or less from paying Pay As You Earn (PAYE) tax. 

The proposal will be included in the Tax Laws Amendment Bill, ahead of the Finance Bill 2026, and is aimed at easing pressure on low-income and lower middle-income workers amid the rising cost of living.

For workers earning between Sh24,000 and Sh30,000, the change would be modest.

Currently, someone earning about Sh30,000 pays roughly Sh731 PAYE every month. 

Under the proposal, that tax would be eliminated entirely, leaving the worker with an extra Sh8,700 a year.

For many households, that difference could cover several months of rent, transport, or food expenses.

Treasury CS John Mbadi also said workers earning above Sh30,000 but below Sh50,000 would not be exempt from PAYE, but they would still receive some relief. 

The proposal includes a reduction of the PAYE rate from 30 per cent to 25 per cent for this bracket. 

For someone earning Sh35,000, this could reduce monthly PAYE from roughly Sh1,800 to about Sh1,700, resulting in savings of around Sh100  every month, or about Sh1200 annually.

Workers earning Sh50,000 would also benefit, though in absolute terms the difference is more moderate relative to gross pay. Under the current system, a Sh50,000 earner pays about Sh5,845 in PAYE. 

With the proposed changes, the first Sh30,000 would be exempt, and the remaining Sh20,000 would be taxed at 25 per cent. 

After subtracting the personal relief, PAYE payable drops to approximately Sh2,600. Combined with statutory deductions, net pay rises from around Sh39,029 to roughly Sh42,275 per month, giving this group an extra Sh3,200 in disposable income.

These figures are approximate and focus on PAYE only, excluding other statutory deductions such as NSSF, SHIF, or housing levy contributions. Actual take-home pay will still vary depending on individual circumstances.

While the announcement has been welcomed by workers, the proposed changes are not yet in effect. 

The tax relief measures must first be tabled in Parliament and approved before they can be implemented.

The government says the reforms are intended to put more money into the pockets of low- and middle-income earners and stimulate household spending at a time when many Kenyans are struggling to keep up with rising prices. 

Whether the PAYE relief will be enough to offset the broader cost-of-living pressures remains an open question, but for millions of salaried workers, even a few extra thousand shillings a month could make a noticeable difference.