Ruto’s Proposed Tax Cuts: What Really Changes for Salaries, Land Transfers and Phone Prices?

Ruto announced on October 20 that the government intends to exempt Kenyans earning Sh32,333 a month or less from Pay As You Earn (PAYE) income tax.

Under the existing tax bands, the first Sh24,000 of monthly taxable income is taxed at 10%, while the next Sh8,333 attracts a rate of 25%.

Resident employees also receive personal relief of Sh2,400 a month.

At taxable pay of Sh32,333, these rates produce PAYE of approximately Sh2,083 per month after personal relief, assuming no other deductions reduce the taxable amount.

Under the proposed exemption, a worker at that taxable-income level could retain that money instead of paying it as PAYE.

The saving would vary according to taxable income.

Some workers earning below Sh24,000 already have their PAYE liability fully offset by personal relief, so they would not necessarily receive an additional reduction from this measure.

The change would affect income tax rather than every deduction on a payslip.

Contributions to the National Social Security Fund, the Social Health Authority and the Affordable Housing Levy are separate statutory deductions and would not automatically disappear under a PAYE exemption.

Land transfers: Relief below Sh1 million

The second proposal targets stamp duty on property transfers valued at Sh1 million or less.

Stamp duty is generally charged when property ownership is transferred.

The current rates are typically 4% of the property's assessed value in urban areas and 2% in rural areas.

On a qualifying property valued at Sh1 million, those rates amount to KSh40,000 and Sh20,000 respectively.

An exemption at the proposed threshold could therefore remove that particular tax cost for eligible transactions.

The Treasury has also proposed introducing progressive stamp-duty rates for higher-value transactions.

The precise bands and rates will depend on the legislation presented to Parliament.

Even if the exemption is approved, buyers would still need to budget for other expenses associated with a property transfer, including legal fees, valuation and registration charges where applicable.

The stamp-duty proposal would reduce one part of the acquisition cost rather than eliminate every expense involved in buying land.

Mobile phones: A possible cut to import costs

The government also wants to scrap the 25% import duty currently cited for mobile phones.

The proposal is intended to make devices more accessible to Kenyans who depend on smartphones for mobile banking, education, communication, online commerce and work.

Import duty is calculated on the applicable customs value, not simply deducted as 25% of the advertised retail price.

Removing it could reduce the cost of importing a phone, but the final retail saving would depend on how the change interacts with other applicable taxes, distribution expenses and retailers' margins.

A phone currently selling for Sh10,000 would not automatically fall to Sh7,500.

The duty is applied within the import-cost calculation, while other charges and commercial costs still influence the price consumers pay.

The extent of any reduction would become clearer once the government publishes its proposed tariff amendments and their implementation details.

What happens next?

The three tax measures formed part of a wider package announced at Kipchoge Keino Stadium in Eldoret.

Ruto said the proposals would be presented to Parliament beginning the following week, alongside a plan to expand the national paid-internship programme to 50,000 young people from January 2027.

The proposed tax cuts are being presented as a way to increase disposable income, reduce the cost of property ownership and improve access to digital services.

For now, the existing tax rules remain in force.

Workers should not expect PAYE deductions to stop, property buyers should not assume stamp duty has been abolished, and importers should continue using the current applicable tariff until the relevant changes are enacted.