Treasury Cabinet Secretary John Mbadi has announced plans to scrap the Ksh28,800 per year personal relief enjoyed by workers as the government prepares changes to Pay As You Earn (PAYE).
Mbadi said the government wants to exempt workers earning Ksh32,333 and below from PAYE by adjusting the tax bands instead of using the current personal relief system.
Speaking on Thursday, October 22, the CS said the Treasury would present the proposal to Parliament next week, including the removal of stamp duty on land transactions valued below Ksh1 million.
"Recently you have heard us talk about some changes in PAYE bands to exempt those earning up to Ksh32,333 from tax. In fact, we want to do away with this thing called relief," Mbadi said.
A collage of jobseekers lining up in Nairobi (left) and the entrance at the National Treasury (right)
Photo
Kenya Pics/National Treasury
If implemented, the proposal could change how employers calculate the income tax deducted from workers' salaries, with most Kenyans who earn Ksh32,333 and below benefiting more.
Under the current tax system, all employees are entitled to personal PAYE relief of Ksh2,400 per month, equivalent to Ksh28,800 annually, as outlined under Section 30 of the Income Tax Act.
The Kenya Revenue Authority (KRA) allows employers to deduct this amount from the income tax calculated on an employee's salary, reducing the PAYE amount remitted to the government.
For example, if an employee's calculated monthly income tax is Ksh5,000, the employer deducts the Ksh2,400 personal relief, leaving Ksh2,600 in PAYE payable to the state.
The relief is particularly important for low-income earners because it reduces the amount of tax they pay each month, leaving them with more money from their salaries.
Currently, employers calculate PAYE using progressive tax bands, starting with a 10 per cent rate on the first Ksh24,000 of monthly taxable income, followed by 25 per cent on the next Ksh8,333 and higher rates on more income.
The latest government decision to remove relief but retain the same PAYE deduction on other tax bands could force thousands of employees to pay more after losing the Ksh2400.
The announcement comes three days after President William Ruto said the government had raised its proposed PAYE exemption threshold from Ksh30,000 to Ksh32,333 per month.
Speaking during the 63rd Mashujaa Day celebrations in Uasin Gishu on Tuesday, October 20, Ruto said he had directed the National Treasury to submit the proposal to Parliament for consideration.
“We have prepared a proposal to exempt Kenyans earning Ksh32,333 per month or less from paying PAYE income tax. For workers on modest income, every shilling saved means more money for food, transport and school expenses,” the President said.
President William Ruto inspecting a guard of honour during the 63rd Mashujaa Day Celebrations at Kipchoge Keino Stadium in Eldoret on Tuesday, October 20, 2026.
PCS