Mbadi Announces New PAYE Plan That Could Allow Low-Income Workers to Keep More of Their Salaries

National Treasury Cabinet Secretary John Mbadi has announced that the government plans to exempt workers earning KSh 32,800 or less per month from Pay As You Earn (PAYE) tax under proposed changes aimed at easing the cost of living in Kenya.

Mbadi said the Treasury is preparing a tax amendment bill that will be presented to Parliament in November 2026. The proposal follows President William Ruto’s announcement of plans to reduce the tax burden on low-income earners.

If approved, the changes would allow eligible workers to keep more of their monthly salaries because they would no longer have PAYE deducted from their earnings. However, the exemption will only take effect after Parliament approves the proposed changes and they become law.

The announcement is expected to draw attention from workers who have been seeking relief from taxes and other statutory deductions that reduce their take-home pay.

Employees in sectors such as retail, security and domestic work could benefit from the proposed exemption, particularly those whose monthly earnings fall within the stated limit.

The government says the plan is intended to ease pressure on households and help workers manage daily expenses, including food, transport, rent and school fees.

Mbadi has indicated that the new threshold was set after further discussions with stakeholders. The revised figure is higher than the earlier KSh 30,000 limit that had been considered under previous tax relief proposals.

The latest proposal does not automatically confirm changes to the tax rates for workers earning above KSh 32,800. The Treasury has yet to release the full text of the proposed legislation, leaving some details about how other income groups may be affected unclear.

Earlier plans had included exempting workers earning KSh 30,000 or less from PAYE and reducing the tax rate for those earning between KSh 30,000 and KSh 50,000. The government has not confirmed whether all those measures will be included in the revised bill.

Workers should therefore continue to follow the existing tax rules until the proposed changes are approved and officially implemented.

The bill will also give lawmakers an opportunity to examine the proposed exemption before deciding whether it should become law. Its passage will determine when eligible employees can begin benefiting from the tax relief.

The proposal comes amid continued public concern about the amount of money workers take home after statutory deductions. For many households, any reduction in income tax could provide additional money for essential needs.

However, the actual benefit will depend on an employee’s salary, applicable deductions and the final provisions approved by Parliament. The government has not confirmed the exact date when the proposed exemption would begin.

Mbadi’s announcement now places the focus on the Treasury’s preparation of the bill and its presentation to lawmakers. Until that process is completed, the proposed tax relief remains a plan rather than an immediate change to workers’ payslips.

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