NAIROBI, Kenya, Oct 25 – National Treasury Cabinet Secretary John Mbadi says an additional 362,846 salaried Kenyans could be exempted from Pay As You Earn (PAYE) tax under a proposed government plan to raise the monthly income tax exemption threshold from Sh24,000 to Sh32,333.
Mbadi said the proposed changes, announced following a directive by President William Ruto, would increase the number of formally employed Kenyans exempted from PAYE from 1.329 million to approximately 1.692 million.
The number of salaried workers paying PAYE would consequently fall to about 1.778 million from the current total of 3.468 million people in formal employment.
Under the proposal, employees earning up to Sh32,333 per month would no longer be required to pay PAYE, providing tax relief to lower-income earners.
“This is something that we have considered very carefully, and what has informed it is the fact that the economy was in bad shape in 2022 and measures were taken to steady it,” Mbadi said.
He added that the government believes the economy has begun showing signs of recovery and that some of the gains should benefit Kenyans who have borne the burden of taxation.
“Now, salaried people, the 3.5 million Kenyans who are in formal employment, those who have borne the burden of this taxation, the economy has shown signs of recovery, so we have decided that part of it should go back to Kenyans,” he said.
Mbadi said employees earning between Sh24,000 and Sh32,333 per month stand to benefit from the proposed adjustment, noting that the affected group currently falls within a 25 per cent tax band.
He said an employee earning within this income bracket would gain an additional Sh2,083 in net monthly salary if the proposed changes are implemented.
“So we now have those earning up to Sh32,333 not being taxed. They will not pay tax,” the Treasury CS said.
He described the proposed relief as significant for lower-income earners facing rising household expenses.
“It will be a relief to them. For someone who earns more, they may not see a huge difference, but for these people, there will be Sh2,083 added to their net salary, and it will alleviate some of the pressures this group faces at the moment,” Mbadi said.
Workers earning above the proposed threshold would continue paying PAYE under the applicable tax bands.
The Treasury CS said the proposal was still being prepared as a legislative measure and would require approval through the relevant legal and parliamentary processes before it can take effect.
“It is a legislative proposal that we are working on, and chances are that we will be ready by next week as guided by the President,” he said.
Mbadi said the Treasury was working to finalise the proposal for submission to the Attorney-General before it is presented to Parliament for consideration.
He expressed optimism that lawmakers would approve the changes before proceeding on recess, paving the way for the new tax arrangement to take effect in January.
“I am very optimistic that this will be passed before Parliament goes to recess. By January, the legislation will have taken effect,” he said.
The proposed adjustment would raise the monthly PAYE exemption threshold by Sh8,333, offering additional relief to lower-income salaried workers while leaving employees above the new threshold subject to existing tax bands.
However, the changes will not take effect immediately and remain subject to the completion of the legislative process and parliamentary approval.